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AllianceBernstein Income Fund, Inc. Message Board

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  • hirsct hirsct Dec 20, 2007 4:21 PM Flag

    Bank Insolvencies

    pls expound on "placing depositors at risk"
    If I have a $100K FDIC-insured CD with XYZ Bank, how is my principle at risk, other than the fact that the insurance only covers a total of $100K, so presumably the interest would be forfeited in the event of a bank failure?
    not a pleasant prospect, but I could live with the risk of only losing a year of interest.

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    • Hirsct,

      I've put this point out for discussion here numerous times in hopes that someone would have a better understanding of the problem in terms of bank accounting methodology. This is maybe the most succint summary of my concerns:

      http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_A/threadview?m=tm&bn=228&tid=40785&mid=40810&tof=11&rt=2&frt=2&off=1
      (I should add that some of these notional derivatives exposures are even more alarming than the average--2,500% or, even, 5,000% assets.)

      Most of the progress I've made on this issue is the result of about two weeks of grueling labor on the FDIC instructional materials and bank data summaries mentioned above. That hardly makes me an expert on the subject, and my practical concerns are the ones mentioned in the msg. to which you responded: if we can't understand the accounting basics of the institution, we do not want to be putting money at excess risk there--whether risk of total loss or delayed reclamation via FDIC depositors' insurance. We are there for safety and liquidity @ the certain rate of return--nothing more or different,

      I've tried to be honest about my limited ability to understand this problem and to point out that we are approaching the problem from an entirely practical standpoint with a consciously inadequate analytic basis.

      Were it still possible, I would have asked my longtime friend--a onetime Treasury bank examiner--about the banks we wish to quit and those where we now wish to deposit. He certainly knew but can't help me now, and that means I can't help you beyond raising the questions.

      I would be only too grateful for some critical response to these messages. Am I wrong? Why? It would save us a great deal of effort--some already expended, more just begun--in overturning important banking relationships of decades. You see, these were the things we never had to think about and find it difficult and time-consuming to think about now.

      Maybe you will know better. If so, please post something.

      • 1 Reply to phage1998_992002
      • 1st I do not recall why a bank I had a checking acct with failed but only my experience with it. This was about 1990

        For me, a small checking acct holder, the change looked more like a merger where bank A today became bank B the next day.

        When I received my checking acct statement from the new bank it had a new $10 monthly fee which was deducted from my acct. I went down to the bank, got my 10 bucks back and was told the type of acct I had came with minimum balance restraints so I could either add funds or take a no interest type acct. My thought at the time was the bank wanted to get rid of small fry such as myself.

        At that time another bank was offering a no fee lifetime check acct with interest which I took. Over time this bank was taken over and so was the newer one. Today I have a no fee no interest checking acct with the latest bank.

        Well so much for lifetime guarantees for it is only good for the life of a bank but when one considers Enron, Polaroid etc of today the only guarantee is how much the top gang can legally steal before they cause the company to fold thus screwing whoever.

 
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