Are Banks Next?

When you read reports coming out about the economic crises that we are currenlty in one of the questions is who is next to fall. A lot of people are pointing to Washington Mutal and other banks. Most people think this is one in the same but they are different. Washington Mutal is a savings and loan. Which means they historically hold on to their loans for a longer period of time especailly mortgages. While most banks originate the mortgage and sell them off in a package to Freddie Mac, Fannie Mae or a mortgage servicing agent. So the bad mortgages that is causing alot of these companies to fail are off the books on most banks. Not so with Washington Mutal they kept most of the mortgages they originated. Since a lot of their branches are located in California and Florida, two of the hardest hit places, they currently have a very high number of bad mortgages. This is not to say that all banks are free from the mortgage fall out. Banks could have bought mortgage backed bonds to help manage liquidity or they could have also made loans to commercial contractors that build houses and with the surplus of new and forclosed houses this has led to a very high number of bankruptcies for this type of compnay if they didn't set aside a reserve to ride the slow times. For years housign contrators were making tons of money and didn't have houses sitting without being sold for an extended period of time but with the economy in the shape that it currently is in houses are setting for a much longer period of time. Also the value in the houses has dropped so this means a cut into profits for theses companies. This will effect banks that loaned heavily into these companies. So some banks could fail but not as many as most people think and only banks that were located in areas that were the hardest hit by the mortgage bubble bursting. Banks are so heavily regulated and audited by FDIC and Federal Reserve each year that they know which ones are in trouble and have programs to help them out. If you want an extra piece of mind that your money will be safe make sure you have less than $100,000 at each bank. If you want to piece of mind and ease of working with one bank, ask your bank if they offer CDARS. To make this short and sweet CDARS program allows you to have all your money FDIC insured. Let me give you an example, if you have $500,000 and you want it fully FDIC insured. You can put into the CDARS program which will send it to 6 banks (your bank plus 5 others) breaking the money up evenly all each under the FDIC $100,000 insurance limit. You money is sent out to other banks and in return your bank get the same amount of money back from someone else doing the same thing. So you will get a statement from your home banks saying you have $500,000 at their bank but in reality you have $500,000 FDIC insured at 6 different banks. Don't worry this is perfectly legal and could help you out if you are one of the fortuate people that have over $100,000 in you checking and saving accounts.