The Great Bank Panic of a few days ago....
So, Rachel wrote about this shortly after it happened, but I wanted to get my thoughts down on the failure of IndyMac Bank. I'm not a financial guy, not much of one at least. I do better than most, but I hate giving advice on the subject because it's like telling people how to play Blackjack - if they lose, they come after you, suddenly forgetting that they were playing a game of chance. Anyway, my point is that I'm writing on it now because I have a little skin in the game... my home loan was with IndyMac.
Now, technically that makes me part of the bad investments that caused the bank to fail, but not really. Rachel and I received our loan long after the credit crunch started causing all this havoc with the economy and what not, so we're actually part of the set that is paying its bills on time, but I guess we were a little late in helping them regain their footing.
From what I've read, Rachel and I are OK since it was the bank that failed and not the home loans. So, we'll just keep sending in our checks every other week and wait for another notice when someone steps up and buys IndyMac.
I've heard on the radio and a few other sources about the troubles the customers of the bank are having. I don't wish that kind of craziness on anybody, losing big piles of money has got to sting. But I'm hearing some odd things from people that make me really wonder how smart some of these customers really were in the first place.
One, I keep hearing that people are waiting in long lines to get their money out. Problem here is that the time to make a run on the bank has already passed since the bank has already failed. If you want to get ALL of your money out, then you have to do it before the FDIC takes over, otherwise, you're only insured for the first $100,000 (although the Feds are giving them $0.50 on the dollar for over that much). At this point, you might as well leave it in there since the bank can't fail anymore than it has.
The other issue I'm having are with people who actually did have over $100,000 in an account. For one, if you've got that kind of money lying around, then you should know what is insured and probably should spread things out a little bit... eggs and baskets, people. Another is, what on earth are you doing that you need to stay that liquid with your finances? I get more than a couple grad stashed away and I lock it up in something, I'm hearing people that had $500,000 in their accounts. Dude, the housing market is down, you could have bought a house with that an doubled your money in a couple of years! Now you're out $200,000. What are you, in the mob? A strip club owner? A drug dealer? I mean seriously, how did you get that much money and be that stupid about keeping it safe?
Sure, you might say, "well, you have to put your trust in your bank", but no, you really don't. You should treat things like it could fail at any moment, especially when things ARE failing at any moment. I moved some money out of one of my accounts to pay for our floors and my finance guy called me with a "whaaaat are you doooooing?" sing song voice because he didn't want me to break anything. That was just a couple grand. How is a half million sitting somewhere and no one is telling people that they should spread it out a tad?
No, I don't mean these poor bastards deserve this kind of headache. Hell, if the FDIC hadn't been invented after the Depression, they would have really been screwed. But I am saying they should have been a little smarter about things. This isn't Monopoly, you can't just reset the board when things like this happen. The people that hold onto their money long enough to become an empire so big that their kids become lazy bastards (that must be their goal, it happens so much now) are the ones that are smart during both halves of the cycle.
Just remember, Barron Hilton bought the Waldorf during the Depression and he's done pretty good since then.
J.
Now, technically that makes me part of the bad investments that caused the bank to fail, but not really. Rachel and I received our loan long after the credit crunch started causing all this havoc with the economy and what not, so we're actually part of the set that is paying its bills on time, but I guess we were a little late in helping them regain their footing.
From what I've read, Rachel and I are OK since it was the bank that failed and not the home loans. So, we'll just keep sending in our checks every other week and wait for another notice when someone steps up and buys IndyMac.
I've heard on the radio and a few other sources about the troubles the customers of the bank are having. I don't wish that kind of craziness on anybody, losing big piles of money has got to sting. But I'm hearing some odd things from people that make me really wonder how smart some of these customers really were in the first place.
One, I keep hearing that people are waiting in long lines to get their money out. Problem here is that the time to make a run on the bank has already passed since the bank has already failed. If you want to get ALL of your money out, then you have to do it before the FDIC takes over, otherwise, you're only insured for the first $100,000 (although the Feds are giving them $0.50 on the dollar for over that much). At this point, you might as well leave it in there since the bank can't fail anymore than it has.
The other issue I'm having are with people who actually did have over $100,000 in an account. For one, if you've got that kind of money lying around, then you should know what is insured and probably should spread things out a little bit... eggs and baskets, people. Another is, what on earth are you doing that you need to stay that liquid with your finances? I get more than a couple grad stashed away and I lock it up in something, I'm hearing people that had $500,000 in their accounts. Dude, the housing market is down, you could have bought a house with that an doubled your money in a couple of years! Now you're out $200,000. What are you, in the mob? A strip club owner? A drug dealer? I mean seriously, how did you get that much money and be that stupid about keeping it safe?
Sure, you might say, "well, you have to put your trust in your bank", but no, you really don't. You should treat things like it could fail at any moment, especially when things ARE failing at any moment. I moved some money out of one of my accounts to pay for our floors and my finance guy called me with a "whaaaat are you doooooing?" sing song voice because he didn't want me to break anything. That was just a couple grand. How is a half million sitting somewhere and no one is telling people that they should spread it out a tad?
No, I don't mean these poor bastards deserve this kind of headache. Hell, if the FDIC hadn't been invented after the Depression, they would have really been screwed. But I am saying they should have been a little smarter about things. This isn't Monopoly, you can't just reset the board when things like this happen. The people that hold onto their money long enough to become an empire so big that their kids become lazy bastards (that must be their goal, it happens so much now) are the ones that are smart during both halves of the cycle.
Just remember, Barron Hilton bought the Waldorf during the Depression and he's done pretty good since then.
J.