Thursday, September 11, 2008

You Know That Times Are Really Bad When Even Buffet Won´t Insure The Risk.....

There is really nothing more you need to know..... I assume the death toll on the Bank Closure Map will spike very soon....

Diese Mitteilung spricht Bände......Bei der Flut an untergehenden Banken die zu erwarten sind sicher keine Überraschung.... Die Anzahl der "Todesfälle" auf der Bank Closure Map wird schon sehr kurzfristig explodieren.....


Berkshire, in Blow to Banks, Reins In Its Deposit Insurer WSJ
Warren Buffett's Berkshire Hathaway Inc. has told one of its subsidiaries to stop insuring bank deposits above the amount guaranteed by the federal government, dealing a fresh blow to the financial-services industry as it tries to assuage anxious customers.

The subsidiary, Kansas Bankers Surety Co., is notifying about 1,500 banks in more than 30 states that it will no longer offer a program called "bank deposit guaranty bonds." KBS is an 18-employee subsidiary of Berkshire Hathaway, according to the parent firm's 2007 annual report. It is one of a handful of firms that offer such insurance, a big selling point for banks trying to attract wealthy customers.

That Mr. Buffett is withdrawing from this insurance market is an indicator of how many in the industry are worried about future bank failures.

In some cases, companies that acquire failed banks will buy all the deposits, making the government insurance limits irrelevant.

But customers with large deposits can lose money if the acquiring bank doesn't take on the extra deposits. When Columbian Bank & Trust Co., of Topeka, Kan., failed Aug. 22, there were about 610 accounts with $46 million total that potentially exceeded government insurance limits, the FDIC said.

KBS insured some deposits at this bank and lost money in the failure, people familiar with the matter said. Mr. Towle declined to comment on whether the bank was a customer.

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1 Comments:

Anonymous Barley said...

When shall we hear that gigantic sucking sound of wealthy depositors pulling cash and closing CDs in these banks? I'm sure it will add some pressure to balance sheets.

Banks will have a duty to inform their clients of this material change and this alone will add to worry.

Financial planners will probably asvise a shift to Ts and maybe a physical holding of cash: "Mary preservation of capital is key so go to your bank, open a deposit box and stuff it with bundles of $100.00 bills - look you are only getting 2.5% interest anyway, so why take the risk*".

*This is exactly what happened in the 1930s. It became such a problem that the USG passed a law that an IRS Agent must be present when a safety deposit was ever opened by a bank customer. Dont know if this law is still on the books, however.

7:33 AM  

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