More Information After the IndyMac Bank Failure

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I had some comments and questions that came in after my email yesterday about what to do after the IndyMac failure. I thought it would be good to put the questions and answers in the blog. I’ve also got some very good information from a former FDIC employee on how the insurance works.

First question: I am trying to find the list of 100 banks on the current watch list, as Diane mentions. Where can I get this list?

DK: This is the question of the hour! They are keeping the list very secret to avoid any more bank runs. Two rumored banks that are on shaky ground are Washington Mutual and Wachovia. But, those are just rumors.

Second question: I very much enjoyed this e-zine. One thing really struck me: that the FDIC insures your retirement accounts up to $250K…….????? On my bank statements where we have IRA’s there’s always a disclaimer that these accounts are NOT FDIC insured. How do I protect myself now?

DK: I’m glad you saw that disclaimer. I’m guessing the retirement funds are held in a security that is not covered. There are two things to be concerned with: First, how good is that security? Second, how good is the bank? I’d ask the bank what happens if the worst occurs. My question is whether the custodian or brokerage house is responsible or whether the bank is. These are great questions. Ask your banker and keep asking (then send a letter certified outlining the conversation so that you have a paper trail.

Third question: You didn’t mention anything about folks who are holding large mortgages with IndyMac. Interest only monthly adjustables and alike. Get out or hold tight?

DK: If IndyMac has your mortgage, I’m not sure there is any risk here. Of course, that depends on the term of the loan doc itself. If you can find a better loan to take you out of a current loan and the terms make sense, that’s a separate decision. I don’t think IndyMac is going to be doing anything to upset their borrowers. The loan from IndyMac is an asset for the company. A customer’s deposit is a liability.

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