Financial question... (1 Viewer)

[Dennis Nicholls]

That's OK....the Feds are probably already after you from your postings here.


There are also the insurance companies for state and federally chartered credit unions. My credit union, Star One CU (a merger of the Lockheed and Martin-Marietta credit unions, bigger than most banks), recently went from being federally chartered to being state chartered because the insurance was the same and there was less hassle being state chartered.

 

[KeithAP]

Another way to handle such as situation is with a financial institution that is a member of the Certificate of Deposit Account Registry Service, aka CDARS.

As I understand it, if you were to deposit 1 million using CDARS, the bank where you make the deposit takes 100K, and nine other members banks would get 100K each. Each account is insured. However to the client, it works like one account. I don't know all the details as I have never used the service. Just happened to read about it recently.

-Keith

 

[Michael Reuben]

Not since 1989, when Congress dissolved FSLIC after a major bailout. Its functions have now been assumed by a division of FDIC.

M.

 

[Joseph DeMartino]

Ah, thanks for that update, Michael. I lost track of the savings and loan scandal and didn't know that FSLIC had been dissolved.

Regards,

Joe

 

[andrew markworthy]

Thanks for the info, guys.

FWIW, I can only recall a couple of Brit banks going bust, but they were fairly small and in both cases the remaining banks bailed them out.

 

[Kevin Hewell]

There were only a couple of bank failures in the UK during the Depression?

 

[andrew markworthy]

Kevin, I'm only 45, I can't remember back then.

So far, things like the Wall Street Crash and the savings and loan scandal haven't hit the UK. The Great Depression of the 1930s in the UK was because of world economic problems, not due to stock market issues or collapsing banks. Brits are far less likely to dabble in stocks and shares and our institutions are controlled pretty stringently. Also, if a bank does get into trouble, usually the other banks rally round and help out and the Bank of England (our central bank) can also step in. I think it's also worth noting that in the UK banking is monopolised by four banks with phenomenal spending power (all of them also own of have key interests in banks elsewhere in the world, including the USA). Therefore there are fewer small banks (where a run on the bank is possible) to go bust anyway. One final piece of trivia - UK banks used to have the right to issue their own paper money which was legal tender and had the same purchasing power as notes printed by the Bank of England. This gradually stopped, but I believe there are still some Scottish banks that print their own notes.

 

[Joseph DeMartino]

Er, it was the same Great Depression, a world-wide phenomenon. You can't neatly divide causes and effects in different countries. The U.S. crisis that began in 1929 caused a ripple effect in other countries, just as the trade policy in various countries (including protecitonist regulations in Europe and the Smoot-Hawley bill in the U.S.) were major contributors to the events. You don't think the stock market problems in New York and in London had an effect on Brits because individuals are "far less likely to dabble in stocks?" In the 1920s and 30s individual Americans were also unlikely to "dabble" in stocks. But since stocks are a major investment mechanisms for institutions including pension funds and corporations which invest their own money in other coroporations, the shaky stock market on both sides of the Atlantic ended up affecting millions of people who never owned a share of stock because of what it did to the companies they worked for and the dislocations it introduced into other parts of the economy. Finally bank failures were not a cause of the Great Depression in the United States, they were a result of it.

There were very few bank failures in the U.S. between the Great Depression and the Savings and Loan scandal. (And comparatively few before the Great Depression.) In both cases the bank failures resulted from a combination of badly-written government regulation and events in other parts of the economy. (Single-branch laws and regulations preventing interstate banking in the case of the banks that failed during the Great Depression, too-generous deposit insurance and a real estate bubble in the case of the Savings and Loans.)

Banks in the U.S. also printed their own paper money (hence the term "banknote") and did so before the U.S. government did. For many years the only legal goverment money was that coined in gold, silver and copper (plus nickel, later on.)

Paper money made to government specification didn't come in until the Civil War - and even then it was initially produced for the government under contract by the American Banknote company, a firm that had existed in one form or another since 1795 and which already held a contract for producing postage stamps for the government. American currency acquired the nickname "greenbacks" during this period, as American Banknote used a distinctive green ink for the back of its new U.S. currency bills - a design element it adapted from the notes it was already making for many private banks. Widespread counterfeiting of these notes led to the creation of the U.S. Secret Service, to combat the fake bills. (The Confederates had a similar counterfeiting problem, although in their case the phony bills were easy to spot because the quality of the printing and engraving was often better than the real thing.)

After the war the problem of fake money in circulation continued (it was estimated that as much as 1/3 of the total Union money supply during the war might have been fake) and in 1875 Congress created the Bureau of Engraving and Printing to redesign America's paper money and assume responsibility for printing it.

Companies like American Banknote continued to produce stock certificates, certificates of deposit and other financial documents for private financial institutions, as well as producing actual currency for a number of foreign governments, either in the United States or through subsidiaries established in the host countries. Some of them branched out into other areas.

I used to work for a company that makes special engraved documents and certificates for financial institutions, as well as holograms for credit cards. (If you have a Visa or Mastercard or other major credit card issued in North America or the U.K. there is a very good chance it carries a hologram produced by American Banknote-Holographics, Inc. of Elmsford, New York. The company is a subsidiary of the current American Banknote company and therefore a direct descendent of the original firm founded in 1795 - hence my possession of way too much information on the subject. )

Regards,

Joe

 

[Holadem]

Thx for the compliment

--
H

 

[Lew Crippen]

I happened to be living in Singapore when Barring's failed.

True not a large bank, but considering how much you Poms value tradition, a significant one.

 

[Yee-Ming]

And I was working in the very building where Barings' offices were. It was surreal going to work each morning during that period, with hordes of camera crews outside waiting to get a shot of Barings personnel -- presumably the infamous Nick Leeson in particular?

 

[andrew markworthy]

A similar thing happened to a friend of mine who is a barrister. He was defending a client in a very complex financial case and couldn't work out why every morning he was being filmed and photographed going into court and why the public gallery was full of people (normally such cases attract no public attention whatsoever). It turned out that Jeffrey Archer (the corrupt Brit politician - just don't get a Brit started on the subject of him) was involved in a case in the next court room and those members of the public who couldn't get seats to see that decided they may as well watch something and so came to see my friend's case.

 

[Lew Crippen]

Actually while (as those of us from Texas might say) Nick Leeson acted alone, Barring's back in the mother country was also complicit.

It turns out that they put Leeson in charge not only of trading, but of checking up on the trades made. As anyone with the smallest knowledge of financial checks and balances knows (actually of almost any area that requires security), this is just asking for trouble.

For the short time that Leeson was reporting very large profits from his trades, Barrings' senior partners just pocketed their bonuses and deliberatly did not inquire closley into the goose producing the golden eggs.

If Barrings' spun the story enough to generate public sympathy back home, they had some very fine press agents indeed.

And don't get your knickers in a knot over my characterization of Pommies and tradition, Andrew. I was just taking the Mickey ...

 

[andrew markworthy]

It was rather more a case of feeling sorry for the other foot soldiers who had absolutely nothing to do with it. It wasn't as if crooked practice was institutionalised.

 

[StephenK]

Andrew,

Another alternative is to deposit it with a financial services firm that has SIPC coverage which covers up to $500,000.00. While I don't think any brokerage is as safe as the large banks, they aren't likely to fail either. Personally, I'd deposit it with a large, retail oriented brokerage, invest in a no-fee money market, and then decide what you're going to do. By the way, broker dealers are required to "lock up" free customer balances (under rule SEC 15c3-3), so even in the event of failure, you're highly likely to recover your funds.