Loading ...US Bank safety references?
A query. Not gold, but at least it is about finance and relevant at least for many people in the U.S.
Do any of you have any **current** recommendations for services that give safety recommendations for banks and similar entities (like S + Ls and credit unions)?
I concede that even the best service may have a hard time figuring things out at present. There is so much potential sleight of hand (clever fraud), and so much is changing so fast.
Over the years I have used at least 4 different services. Some have charged money. Others have been free or have offered some information for free, sometimes depending on the year. One set of results, probably expensive, I found only in the obscure reaches of a large municipal library once, but it was free. Others have been online. Etc. At least two services have changed drastically in the past several years.
I am by no means sure whether amount of money charged correlates much with reliability, nor am I confident that past reliability of a service necessarily correlates well with current reliability. I think if I knew more about the topic, had more time on my hands, and knew my way around the FDIC website and possibly other US regulatory websites I could do a pretty decent job on my own, but pigs can’t fly.
So — any recommendations on checking on US banks for safety in July, 2020? I would want to check them out by locale.
Back in 08 I would used Bauer Financial. Is that one of the ones you think has gone downhill?
I never heard of Bauer until I saw in listed on an internet search today.
I do not know whether others have gone downhill or uphill. I do note that one went from charging a large fee to charging no fee to charging a fee. Another just listed information but now requires you to sign up — probably you get info for free.
Any bull-dog types with accountant-like mentalities out there who have spent hours looking into this stuff in recent weeks?
Have you considered a credit union? Credit unions do not have derivative risks that banks commonly have. Credit unions generally make very few loans as a percentage of their assets. They don’t lend to business.
They make a few car loans and house loans, very few. The well run ones do not buy European debt that is connected to a large German bank that has massive derivative risk. You might have trouble getting a good credit union to let you in. You start off with a small deposit and wait a bit and then one night hit them with a transfer that they then must accept.
I have seen the argument that credit unions themselves have to use banks and therefore any apparent safety is suspect. I do not know. I do not know at all.
Last time I looked (almost a decade ago) I was not eligible for some of the supposedly safer ones.
The idea seems good.
This link may be useful. https://weissratings.com/
It really doesn’t matter. Keep under FDIC maximums. Even if your bank doesn’t do risky business if one fails and isn’t bailed out they all fall like dominoes. Anyone having enough wealth to put in multiple banks at $250K per is crazy to keep that much fiat. Buy physical or do what I have recommended previously. Buy CEF.
Right
The best source is Weiss IMO
https://www.weissratings.com/safety-ratings
However Rick Rule has habitually mentioned that he puts his money into Farmers and Merchants Bank of Long Beach
Thank you to everyone who has answered so far.
I have used Weiss since the late 1980s and other services at times. I do not know whether Weiss has changed in quality (and if so for better or worse). With the last iteration of Weiss one could look up institutions for free, and also they would track a fixed # of institutions for free, sending you notifications of changes, as well as many, many advertisements. About 2 weeks ago they notified me of downgrades of 2 banks where I have small accts and this week of an upgrade of one of those 2 back to where it had been. I wondered whether sending me these notifications was an advertisement of sorts. When I tried to find more info about other banks I found that for a fee I can get information on banks, insurance companies, and also stocks. So apparently they have changed from fees to no fees to fees, but fees in a different way from before. In the past I had the impression that Weiss was more reliable than all than at most possibly 1 of multiple alternatives.
As for CEF, I have written about PFICs before and don’t want to go into the matter much, but before Sprott bought it CEF said it was a PFIC (Passive Foreign Investment Company), and I am rather sure that the US Treasury would consider it a PFIC. My accountant has ordered me to have no PFICs except that I think I am allowed them in IRAs (or at least that’s what 1 estate lawyer once told me–he was no expert but he sometimes fills out the ghastly PFIC forms for various estates or trusts). There are any number of little points one way or another, and if it weren’t for the PFIC question I would be using CEF or possibly PHYS as a bank account, but because of the PFIC edict from the accountant, no in my case. But I don’t know and anything I write might be misleading or just plain wrong.
(To digress on PFICs–I wasn’t going to–My understanding [or misunderstanding] is the IRS treats PFICs held for 30 days or less as regular US stocks, so I do park cash in CEF, PHYS, or PSLV temporarily, and though I am by nature a buy-and-holder I am teaching myself to trade PFICs a bit.)
I like little banks, and local ones where I could at least stand outside and make nasty faces at them. I have read the argument, which makes sense, that the hugest financial entities will always get bailed out, even as the most responsible local bank and credit unions go under.
Disclaimers, disclaimers: I put in weeks trying to figure out PFICs after being read-the-riot-act by the accountant. I alluded to a drive-by casual off-the-cuff remark by a nonexpert lawyer who might not stand by it, if in fact I heard it right. If you look into the matter you will find that even accountants and tax lawyers like to avoid the topic, and even those who specialize in US taxes of non-US investments consider PFICs unreasonably confusing and difficult, more so than most tax law. Don’t go by anything I have written. It might be right or wrong.
For what it is worth, here is the link to Bauer Financial for anyone who wants to check the safety rating of their bank or credit union. Five stars is the best.
https://www.bauerfinancial.com/star-ratings/
The FDIC has a very limited amount of funds and they only can cover an occasional bank failure here and there. When a bank folds, typically it is taken over by another solvent bank over the weekend. However, if there is a run on the banks, they could close their doors temporarily and/or limit the amount of cash withdrawals.
As of March 26th of this year, savings institutions are no longer required to maintain 10% of deposits on reserve. That should make you think twice about keeping a lot of savings in a bank account.
Incidentally, small banks and credit unions are typically connected with larger banks. These small banks typically deposit checks and cash into their account with a larger, commercial bank once or twice a day. So, they are connected to one another in a network of financial dominoes.
Years ago, I worked for a small savings bank for a number of years. That was at a time when the banks paid 5.5 percent interest on regular savings accounts.