I saw this article in the Wall Street Journal. It is so very important for "unwashed the masses" (that's you and me!) to know, but no one in the MSM talks about this stuff.
The largest number of bank failures in nearly 20 years has eliminated jobs, accelerated a drought in lending and left the industry's survivors with more power to squeeze customers.In just over 2 years, nearly 300 banks have gone teats up.
Some 279 banks have collapsed since Sept. 25, 2008, when Washington Mutual Inc. became the biggest bank failure on record. That dwarfed the 1984 demise of Continental Illinois, which had only one-seventh of WaMu's assets. The failures of the past two years shattered the pace of the prior six-year period, when only three dozen banks died.
Our banking system is going through a massive consolidation. Massive. The article goes on to discuss how they expect there to be around 5,000 banks in the US in the next couple years. That is down from the 8,000 or so we have now.
To put this into perspective, in the early 1980's, there were over 15,000 banks.
This consolidation is primarily due to mergers, not failures. After the interstate banking laws were eliminated in the 80's, the rush was on to buy banks to increase your market share. I worked for 3 different banks in the 90's and early 2000's that all got bought-out.
But that's not what's going on right now. These banks are shutting down, and the FDIC is selling their assets for pennies on the dollar. Why merge at market prices when the government will give you discounted assets?
Such a deal. And expect a lot more of it.
No matter how the administration and the banks sell this, it cannot be good for the average American. More control in fewer hands rarely ends well.
As part of one of the "Financial Reform" bills, there was a consumer protection clause that was aimed directly at small non-traditional lenders (I don't know if this clause was eventually included in the bill that passed - but I'd bet a big stack of money that if not, it will be in the future). What this clause said was ANY lending had interest rate ceilings and compliance requirements, regardless of what the money was used for. Supposedly, it even covered personal loans between private individuals.
For instance, if you want to borrow some short-term money and have no collateral, you should expect to pay a very high rate. The lender is being paid for the risk they're taking.
With this bill, a private or small lender will be required to meet all of the compliance and interest rate limits, just like a big, multi-national bank.
Your first reaction might be, "Great. Those scummy private lenders are just taking advantage of someone in bad financial times!"
In reality, what will happen is the little lenders will go out of business because they can't make a profit. The big banks won't make that loan because it's too risky and they can't make a buck either.
You still need the money, so where do you go? To the guy with the bent nose in the alley. Their overhead costs are low, but their collection department is, uhm, unorthodox.
Bottom line: Once again, when government intercedes in the free market and rushes in to protect the consumer, the consumer generally gets the short end of the stick.
It's good to be protected, huh?
Have you seen gold and silver? OMG.
As of this second (11:40am PST) it is at $1,307.60, up $13 per ounce. Silver is at $21.72, up 26 cents. If you look at the reason for the gold increase (top of the page) the $13 increase is $7.60 due to the dollar weakening, and up $5.40 because buying is pushing the price up.
Dollar tanking, people fleeing to PMs. Well there's a shock.
Accept The Challenge
Why anyone has any kind of savings account sitting in a bank is beyond me. Unless you have no other place to keep your money - a home safe, a can in the backyard - you are losing money every single day.
Interest rates are abhorrent - a great rate is 1% and they want you to tie your money up for 12 months. Really, the only benefit is that they're holding on to your money for you. My mom, for instance, feels good with that, so I don't give her (too much) grief. But for every month your money sits in that CD, you're losing purchasing power.
PM's clearly have a market risk component that is usually not present with a CD or savings account. There is no denying that. This is a very personal choice that requires research and commitment on your part. But at least right now - and I believe for the foreseeable future - money sitting in a bank digs you a financial hole.
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