Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

FDIC & bank failures

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It may be a sign of the times that I received a post-silver certifcate certificate $20 bill in change from Aldis over the weekend.  Our currency – now at new lows – used to be backed by gold and silver.  The currency itself was the contract; each bill said (originally) “There is one on deposit in the Treasury of the United States of America $20 Dollars in Silver Coin payable to the Bearer on Demand.”  Older readers may remember being able to take a paper bill into a bank and receive a silver coin in exchange. (Gresham’s Law in reverse, but that’s another post.)

Naturally, as the government printed more bills (made more promises) than there was coin in the vault, the contact is a fraud. So they changed the contract to “The United States of America will pay to the bearer on demand Twenty Dollars.”  Gee, thanks.  I have a paper promise in my hands and as security the government will give me more paper.  Who wins and who loses in that exchange?

  The bill I received is a fairly crisp specimen from 1950.  Could it be that prior to its brief time at the top of the till at Aldi’s, it was securely nestled all these years in the mattress of a poor pensioner who is just now working her way down, like an archeologist, to that tranche of her savings and reserve?

Enough gravy: here’s the meat.  If you have more than $100,000 in any bank no matter how local and trusted, in any account no matter how its titled, you must  review the rules on FDIC.gov.  Do not rely on the gentle assurances of the teller that your $200,000 CD is just fine.  Pay particular attention to the rule differentiation on pay on death (POD); joint accounts; revocable trusts; and irrevocable trusts.  

Of course, if you have $200k in a CD for general savings or anything other than a time-specific goal we need to chat.

UPDATE:  this good post from Mish Shedlock covers a fair amount of ground too.


Written by heyercapital

July 15, 2008 at 12:41 pm

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