Monday, April 13, 2009


Excellent skf board poster...wilsin asks some common sense question:

Why bother keeping money in banks now? 15 minutes ago
Just something to consider but there appears to be decent-sized risk and little if any value proposition in keeping money in banks. First, one thing people usually get by keeping money in banks is a return on investment. Now, we are living in an environment in which you get nothing for savings deposits and only 2%+ for longer term Treasuries, so what's the use.Second, banks are more secure than say stuffing the money under your mattress. But if you can disperse your funds in a few, safe locations unknown to others and with small safes or vaults, you can secure lots of money at little cost.Third, right now it would be easier to get your money out of your own private caches than from a bank bc 1) they are not keeping the money on hand bc they do not have it, and 2) they are throwing up regulatory hurdles and beauracratic excuses to not giving YOU back YOUR money.Fourth, as to security, who knows which bank is going to blow up next. Is the security of having money in a bank worth the risk of your bank going under?Fifth, and aren't you also running the risk of FDIC running out of funds any day now? Sheila Bair herself admitted that FDIC will be functionally insolvent before the end of the year. But who knows when that tipping point will be reached.Sixth, the temporary increase in FDIC coverage from $100k to $250k runs out at the end of the year. So why get caught in the stampede out of banks when that expires?Seventh, when you take your money out of the banks, you decrease their ability to play the games that they are playing. Remember, they are leveraged at least 10 to 1 for every $1 deposited in the bank, so each dollar removed goes a long way towards preventing the banks, particularly the big ones, from using your own money against you. And if you read these boards and other blogs, you already know the games they are playing.Again, just some things to consider.

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