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Speculation drives fear and fear can drive to bad investment decisions.
It started with Indymac. Then Freddie. Then Fannie.Last Friday, the news couldn't come fast enough with news of banking and financial institutions that had failed and were looking for a bailout. Indymac was closed July 11th by the Office of Thrift Supervision with the Federal Deposit Insurance Corporation named as conservator. The Indymac failure is expected to cost around $9 billion as Indymac had total assets of $32.01 billion and total deposits of $19.06 billion as of March 31, 2008.
Additionally, the FBI has opened an investigation to the situation.
Other Fall Out
With the uncertainty, speculation has run wild. Cleveland-based National City, with branches located throughout Mid Michigan, was the victim of such "information."
On Friday, investors dumped their shares dropping the share price as much as thirty-percent in one day. The news forced the National City to issue a statement that it was "experiencing no unusual depositor or creditor activity" and "maintained more than $12 billion of excess short-term liquidity." A few days later, the stock price is trading back at its original level.
Locally, Mid Michigan banks are also feeling the perception crunch. Midland-based Wolverine Bank issued a press release reaffirming its 79th five-star status from BauerFinancial, a leading independent bank rating and research firm. Others added information to its website about FDIC.
What to Know, What to Do
Tony Cutler, a personal banker with Fifth-Third Bank, has offered his insight in his article in Expertly Told. He suggested the following:
- You may be covered with more than $100,000 insurance,
- Depositing at different branches of the same chartered bank does not increase your coverage,
- Some banks have separate state charters,
- FDIC will cover your insured deposits,
- Be cautious of banks with "unusually high interest rates,"
Find out more by reading his article at: www.midmichigannotebook.com/content/story/10766/