Skip to comments.$1.2 Trillion Of Nervous Money Floods Into U.S. Banking System
Posted on 09/18/2011 3:34:36 PM PDT by fightinJAG
With the European banking system tottering on the brink of collapse, nervous holders of cash have flooded the U.S. banking system with $1.2 trillion of deposits. Panicky holders of large amounts of cash are taking advantage of a provision of the Dodd-Frank Act that provides unlimited FDIC insurance coverage on noninterest-bearing transaction accounts.
The Dodd-Frank Act provides unlimited deposit insurance coverage regardless of the account balance or type of ownership. [snip]
After the near total meltdown of the financial system in 2008, investors are taking steps to move their money into government guaranteed accounts. The revelation that money market funds run by Fidelity and Vanguard had a significant portion of their assets invested in European bank debt contributed to the deposit surge into U.S. banks.
Normally banks would love to have interest free money but these are not normal times. . . . Since the Federal Reserve has forced interest rates to zero on the short end, banks are actually charging fees to accept large deposits to offset the FDIC deposit insurance assessment fees.
Depositors are so worried about the safety of their money, they are willing to pay the banks to hold their money. The banks, unable to profitably invest the funds, would just as soon not take the deposits.
The amount of deposits insured by the FDIC has surged since last year. For the quarter ending June 20, 2011, the FDIC insured deposits of $6.54 trillion, up 20.7% from $5.42 trillion at September 30, 2010. Backing up the FDIC insurance coverage of $6.54 trillion of deposits is the FDIC Deposit Insurance Fund which has a balance of only $3.9 billion for a reserve ratio of a minuscule 0.06%.
(Excerpt) Read more at problembanklist.com ...
Not necessarily. They are only earning interest on reserves if they are able to lend them out and turn a profit on the loans, which they are not at the momemt.
Moreover, the deposits COST the banks money because they have to pay a fee to the FDIC for every dollar on deposit.
So the banks are not making money on the deposits (no loans are being made due to ZERO DEMAND in the real economy) and they are having to shell out money on the deposits to feed the FDIC.
Sadly, I think that’s exactly where we are going.
Nothing but high stakes international 3 Card Monty to skim the cream and steal as much as fast as they can......to steal the fiscal futures of the working man.
The FDIC amount goes back down to $100K 01/01/2014 ....posted on their site.
In fact, there's also another problem: Chinese banks, unlike American banks, a also highly-leveraged, too. One wrong move in the Chinese economy and those banks will collapse like a house of cards.
Indeed, one good thing about what happened in 2008 was it forced American banks to stop being so highly leveraged. A bank like JPMorgan Chase quickly went out of their way to use TARP money to rebuild their asset base, paid the TARP loan back quickly, and as such they will likely be around for a long time to come. Indeed, do not be surprised that many European banks now suffering from the European sovereign debt crisis could become takeover targets for American banks a few years from now.
Go for it. I’m at work this a.m.
I think that is already happening. You can't build whole cities and 65 million apartments and leave them empty. That is not a productive use of the nation's investment capital.
Or just as bad, high-speed trains that only relatively few people can afford to ride in and have an iffy safety record....
-.02 but improving.
Empty factories, empty apartments, empty cities, empty malls, high speed infrastructure boondoogles. Command economies do not work. Command economies on this scale will fall big and fall hard.
Not that the interest is that high these days.
Wonder if the Feds and FDIC are required to keep the “insurance” money (or a large percentage of it) in escrow or other assets just in case they need it. Probably not — betting that they are not required to follow the same laws that they require the private sector to follow.
Just a promise to pay like Social Security, etc.
And what happens if they default — just print more money I guess.
What a scam.
The cash reserve is something like 0.06% of deposits at the moment.
So, yeah, it would be printing time, big-time.
So everybody starts scrambling to break their deposits up into multiple accounts at that point?