What banks are safe?

No bank is "safe" -- they are *all* at risk (for sufficient values of "risk").

Some are safe-er than others, but none are truly safe. Any bank can fail at any time for a large number of various reasons.

I wouldn't bet on that. A lot of the smaller independent banks, just due to their smaller nature and other limiting factors, were a helluva lot more cautious in what types of folks they'd extend credit to. A lot of my local banks only do commercial -- won't touch residential -- and only then to the top-tier of borrowers. They're *extremely* careful with what they loan out, and have been throughout the entire ridiculousness of the recent CrazyLoanFrenzy(tm).

Now ya got it!

.

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At the same time, you have to look at the risk of the options. Putting it under your mattress opens you up to home invasion, theft, loss by fire, etc. You also don't earn any return if you burry the money in your back yard, so you are losing buying power.

I don't think that the risk of loss due to a bank failure is that much to worry about, especially when compared to the risk of non-bank options.

If the OP is nervous, then they should spread their money around to several different banks. That way, if one has an issue, you are not stuck without access to cash while that one back sorts things out (or the FDIC sorts it out).

-john-

True, but if your deposits are below the FDIC limits, you don't really care. The Feds close the old bank on Friday, open the new bank on Monday. The only difference is the sign over the door. As I mentioned earlier, I had it happen three times on my checking account.

Right. Many local banks can't even spell "CDO". That's a good thing.

-- Doug

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Mitigate risk by diversifying... Isn't that the basic risk mitigation technique?

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You might read the business columns in newspapers. They are tracking local banks. Banks are supposed to periodically report profits and non-performing assets, but some have been known to lie :-) In this climate a safe bank will be making huge profits because the spread between FED rates/deposit interest and mortgage rates is largest in my memory. The local bank I use reported a 41% profit increase this year and non-performing loans of 0.15%. Anything over one percent might be shakey.

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That is not entirely true, at least in my case. As I wrote earlier, I am dealing with my mother -- an elderly and "paranoid" person (not clinically, but enough to bother me). So I am looking for a hassle-free solution

-- that is, hassle free for __me__. Yes, I know there are no guarantees. But there must be "better ones". For example, Chase Bank is among the highest ranked by bankrate.com, and its financials are impressive. Unfortunately, there is no branch near my mother, and she requires a brick-and-mortar institution. (So do I, actually.) Moreover, if her bank were closed, I'm sure I would have to hop on a plane if only to make her feel better. Besides the expense, I am not in a position now where I can drop everything and run to her side just to assuage her concerns.

Sometimes; sometimes not. I don't believe that is the case Indymac, for example. The FDIC will not run the bank, except to disburse accounts. The bank can be reopened only if another bank is willing to over the failed bank.

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I use bankrate.com, but it is not foolproof. On the other hand, if you keep the balance in any single bank to less than $100k (give some room for interest to be earned), a bank failure should not pose much of a problem. I would still look for banks with decent ratings, but beyond that trying to guess big vs. small; national vs. regional is not very productive.

And I prefer separate banks to separate, differently held accounts within a single bank. Not only might I screw up (relying of bank "advice", if a bank fails, there might be some delay in obtaining my funds - the likelihood that ALL my banks will fail seems pretty remote. Further, at least from what I have heard re the recent INDYMAC bank failure, deposits less than 100K did not involve a delay in accessibility - the "new" bank took over the next day.

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Over last weekend the largest (27 branches, $$$B in assets)AZ bank was shutdown, the Feds took it over, sold it to Mutual of Omaha (who wanted to get into the Southwest banking anyway), and all branches are open this morning with new signs, old people, and safe money for ALL depositors. Most times the system actually works.

That says nothing about allaying the fears of a paranoid mother. Been there, done that, have the scars.

Chip

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Pretty much the case with IndyMac, though it was Mon and Thurs, not Fri and Mon.

IndyMac was closed by the Feds on Mon, Jul 11. IndyMac Federal Bank was opened on Thurs, Jul 14.

All non-brokered insured deposit accounts have been transferred to IndyMac Federal Bank, F.S.B. (IndyMac Federal Bank), Pasadena, CA ("assuming institution") a newly chartered full-service FDIC-insured institution. The OTS appointed the FDIC conservator of IndyMac Federal Bank. All insured deposit accounts will be available as usual during regular business hours starting July 14, 2008.

As far as I can tell, ATMs never stopped working, and other access was simply suspended -- including physical access (ie. safe deposit boxes, etc) -- for three days.

As of July 14, 2008 you may continue to use the services to which you previously had access, such as, online service, safe deposit boxes, night deposit boxes, wire services, etc.

Your checks will be processed as usual. All outstanding checks will be paid against your available insured balance(s) as if no change had occurred.

That's a pretty painless bank failure (from the under-the-FDIC-limits consumer point of view).

IndyMac may be an exception, though - it was too big to move all the assets to some other bank - the new bank might have had to be created on top of the old one. Much smaller banks may be handled differently, perhaps through moving the assets to another local bank.

On the calendar I've been using, July 11 was a Friday and July 14 was a Monday.

Elizabeth Richardson

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D'oh. Sorry - I was looking at Aug.

I'd better figure that calendar out before certain birthdays and anniversaries come around!

Anyway, the more I read about how they've been handling these things, the more impressed I am with the smooth and efficient operation of the FDIC when it needs to step in.

That said, if I had enough in banks to be worried about the FDIC coverage limits, I think I'd want to diversify across multiple banks. Heck, limits or not, I keep two active checking accounts, as well as checkwriting access to a couple of brokerage accounts. Not out of fear of not being able to access the cash, but for general convenience, and for different purposes.

Thanks for the correction.

Go to Bankrate and look for banks with 4 or 5 stars. For example, here is a list of savings accounts, sorted by APY.

Unfortunately, I don't see any banks with 5 stars. The bank with 4 stars that offers the highest rate in a savings account is Zions Bank, offering 3.56% APY.

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