Thursday, August 21, 2008

Is Your Bank Safe from Collapse?

'JP Morgan Chase acquires the Bear Stearns financial empire for $260mln. That’s less than the $275mln the New York Yankees paid to secure A-Rod for 10 years!

Ordinary Americans, usually too preoccupied gossiping about junk like Tori Spellings new baby, are finally starting to realize that somethings not quite right with America’s financial system.

The US economy is–to put it bluntly–whack.

Housing prices are still falling. Home foreclosures are heightening. The US Dollar is depreciating. Gas prices are skyrocketing. Inflation is soaring.

Is this the beginning of the great bank run of 2008?
Ben Bernanke and Warren Buffet predicted in 2007 that we would see major bank failures in 2008. They seem to be right, but who is next?

What I am afraid of is seeing a large consumer bank fail. If a major bank like Washington Mutual, Bank of America, or Wells Fargo were to go under, Americans would panic and make a run on the banks, withdrawing their savings.

If you know anything about how banking works, bank runs create a vicious cycle of financial pain that does exponential damage to the way banks operate. To make things worse, there are rumors that the FDIC only has $54 billion to cover over $4 trillion in deposits.

What is the safest bank to put your money?
I honestly don’t know... '

By J, Wu 

Source: Bankaholic

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