Benda said the rapid outflow of withdrawals has subsided, but he expects them to resume once people receive their stimulus checks from the federal government. “If another spike happens, the system has a lot of spare capacity,” he said.
He did warn, though, that people’s stimulus money is probably safer in the bank: “Once that money leaves the bank… there’s no insurance on it.” He warned, “You could get robbed.” “Robbing a bank is far more difficult than robbing a person.”
The FDIC, which was established in 1933 after the Wall Street crisis of 1929 and the advent of the Great Depression saw thousands of banks fail, is a major cause for this. Since the FDIC’s inception, no depositor has ever lost a penny of the money it protects.
The bank is a safe place for your money, even if it fails
The 2008 financial crisis began in the financial sector and spread throughout the economy. This time, the crisis is originating in the broader economy, with businesses closing and millions of Americans losing their jobs, and then spreading to the banking sector.
The government is taking steps to ensure that banks have the funds they require right now, and banks are better capitalized this time around than they were the last time, which means they are better financially prepared to weather the storm. Banks are also encouraged to use the Federal Reserve’s “discount window” to obtain loans if they require them in order to continue lending to individuals and businesses. The Federal Reserve said last month that the largest financial institutions have $1.3 trillion in common equity and $2.9 trillion in high-quality liquid assets. This was essentially a reassurance that the banks are fine, that they have access to a large amount of cash if they need it, and that the central bank will assist them if things go much worse.
Even still, banks, like the rest of the economy, are suffering right now. However, if your bank fails, your money isn’t lost, as long as it’s insured by the FDIC.
“If your bank fails for whatever reason, the government takes it over” (banks do not go into bankruptcy). In an email, Aaron Klein, policy director at the Brookings Institution’s Center on Regulation and Markets, stated that “this is frequently done on a Friday night, and by Monday morning your local branch is operating again, often as if nothing happened from the depositor’s point of view.” “In most cases, the FDIC seeks to locate a new bank to buy the failed bank (or at least its accounts), and your money is automatically transferred to the new bank (just as if they had merged).” If not, the FDIC will continue to operate your old bank under a new name until they can find a new bank to take over your accounts.”
For example, in early April, the FDIC shuttered the First State Bank of Barboursville, a tiny bank in West Virginia. MVB Bank has taken over its deposits, and the bank’s branches will reopen as well. As a result, those who had previously banked with First State Bank have switched to MVB.
Is it possible for the government to seize your funds?
As previously indicated, the IRS would attempt to collect debts owing by the person multiple times before seizing a bank account. Unless the IRS believes the debtor has made no effort to address his or her tax debts, the IRS will rarely utilize this strategy.
If the IRS is unable to contact you or collect your debts after many tries, they will issue a notice of intent to seize your property. This notification is also known as the Notice of your Right to a Hearing and the Final Notice of Intent to Levy. You have 30 days after receiving the notification to fix your debt before the IRS seizes your bank accounts.
If you receive a notice of levy from the IRS, you should act quickly to resolve your tax problem. If you’re trapped and worried that a levy would put you in a financial bind, seek the advice of a bankruptcy lawyer. If you can show that the levy will cause you substantial financial hardship, an attorney can assist you get the levy lifted. An attorney may be able to assist you in getting your claim refunded if your account has already been levied.
When the IRS does not have to issue the 30-day Final Notice of Intent, there are a few exceptions. They may not issue a warning if they believe collection of the money you owe is in threat. Furthermore, if the IRS is collecting from a state tax refund or has issued a Disqualified employment tax levy, no notice is required. They will provide you a notice of your appeal rights if they do not give you 30 days notice prior.
In a crisis, may the government seize money from your bank account?
Note from the editor: I thought I’d share this second essay from analyst Frank Koster. (Read his first article HERE if you missed it.) While the idea of the government “borrowing” from people’s savings accounts may seem absurd, you might find this history of government asset seizures interesting and instructive.
Our only purpose as investors is to observe and react to what is happening in the world around us.
Our staff is diverse, with people of many ages and ethnicities. We’re not attempting to push a single story. If I ever get into politics, it will only be to inform you about what individuals are saying and how it may affect your money and investment ideas.
With that out of the way (please, no pitchforks), I’d like to draw your attention to something recently mentioned by a member of President-elect Biden’s coronavirus task committee…
Ezekiel Emanuel is his name, and he believes an eight-week NATIONAL lockdown is required to manage the pandemic.
As a Biden adviser, you can bet he’d offer this to the President-Elect.
… claims that a four- to six-week US shutdown might contain the pandemic while also reviving the economy.
To be clear, they are recommending that, upon Biden’s inauguration, he impose a nationwide lockdown in ALL 50 states.
Understandably, many people are concerned in the midst of what is shaping up to be the largest economic disaster in a century.
When people ask how they will work or how businesses will survive, the answer is that they will dole out more free money (to everyone).
Apart from the fact that the Fed produced more money in June than the US had printed in the first 200 years of its existence…
It’s the possibility that the US government will “borrow” money from your 401(k), IRA, or even your savings account to fund social programs and wealth redistribution plans.
To be precise, it was suggested by Neel Kashkari, president of the Federal Reserve Bank of Minneapolis.
President Franklin D. Roosevelt of the United States confiscated everyone’s gold savings in the 1930s under threat of incarceration and huge fines.
Then, once all of the gold had been collected, he instantly raised the price per Troy Ounce of gold to $35, effectively reducing the purchasing power of all Americans’ cash holdings by approximately 40% overnight.
That happened right here in the United States, and it happened so recently that if you were born before 1985, your grandfather or father most likely witnessed it.
Countries that have recently found themselves in a debt crisis have resorted to raiding citizens’ retirement funds.
You may now believe that the government is not “permitted” to withdraw money from your personal savings account.
Remember that when you deposit cash in a bank, it becomes the bank’s property. The bank is obligated to return the money to you, but it is not required to do so.
And the federal government can confiscate the money at any time for a variety of reasons.
Your IRA has a similar story. Understand that the federal government has the authority to change the regulations of your IRA at any time.
Here is a “short” list of countries that couldn’t resist the urge to raid people’s money and investments.
The administration of the country advised its residents in 2010 that they could either transfer their own retirement funds to the government or…
…or risk losing your minimal state pension. Meanwhile, they were still obligated to pay contributions. What’s the end result? The government took custody of $14 billion in people’s hard-earned cash.
The Irish government took 4 billion in 2009 to help banks… Then 2.5 billion in 2010 to assist the rest of the country’s bailout.
President Evo Morales seized $10.2 billion in personal retirement savings in 2015.
The government of Argentina froze bank accounts and prohibited withdrawals from accounts denominated in US dollars. Everything was done in the name of “saving the country.”
More than half of the assets stored in individual accounts were taken by the Polish government in 2014.
The Bulgarian government proposed transferring $300 million in private early retirement funds to the public pension system. Fortunately, trade unions raised objections, and the government only used around 20% of the original plan.
To minimize the short-term pension system deficit, the French parliament voted to take 33 billion from the national reserve pension fund FFR in 2010.
They would be able to utilise the retirement funds set up for the years 2020-2040 earlier in this manner. In other words, between 2011 and 2024.
And the government would be free to spend the resources it had saved on whatever it wished.
While our politicians discussed expanding the nation’s legal debt limit, the Treasury Department borrowed from government workers’ retirement savings.
It had borrowed government workers’ retirement funds for the fifth and sixth occasions in 20 years.
In 2008, a panel of the United States House of Representatives heard testimony in favor of eliminating 401(k) plans and replacing them with “guaranteed retirement accounts.”
Workers would contribute 5% of their earnings, while the government would contribute $600 each year and guarantee a 3% return.
They could save the government $80 billion each year on 401(k) tax incentives this way.
In other words, when the government is financially-strapped, our savings appear to be enticing cash piles.
With a $27.2 TRILLION national debt and COVID wrecking the economy, it’s a recipe for disaster. The government is in desperate need of funds. There was a lot of it.
As you may have noticed, the option is currently being considered. And it has the potential to devastate your retirement funds and goals.
Then? I recommend investing a portion of that money in the next ten years’ most explosive growth patterns.
No matter what happens in the world, I’m talking about growth tendencies that can scream up to 5,000 percent or more.
Political instability, protests, hyperinflation, and even all-out war will have no effect on these tendencies.
Finally, I recommend securing your wealth in an impenetrable location that continues to develop and provide remarkable returns 24 hours a day, seven days a week.
Of course, it’s easier said than done, but my team and I have devised a three-step investment strategy that checks all of those boxes.
The Trinity Retirement Blueprint is a strategy that takes advantage of your current subscriptions.
During a recession, should I keep my money in the bank?
- You have a sizable emergency fund. Always try to save enough money to cover three to six months’ worth of living expenditures, with the latter end of that range being preferable. If you happen to be there and have any spare cash, feel free to invest it. If not, make sure to set aside money for an emergency fund first.
- You intend to leave your portfolio alone for at least seven years. It’s not for the faint of heart to invest during a downturn. You might think you’re getting a good deal when you buy, only to see your portfolio value drop a few days later. Taking a long-term strategy to investing is the greatest way to avoid losses and come out ahead during a recession. Allow at least seven years for your money to grow.
- You’re not going to monitor your portfolio on a regular basis. When the economy is terrible and the stock market is volatile, you may feel compelled to check your brokerage account every day to see how your portfolio is doing. But you can’t do that if you’re planning to invest during a recession. The more you monitor your investments, the more likely you are to become concerned. When you’re panicked, you’re more likely to make hasty decisions, such as dumping underperforming investments, which forces you to lock in losses.
Investing during a recession can be a terrific idea but only if you’re in a solid enough financial situation and have the correct attitude and approach. You should never put your short-term financial security at risk for the sake of long-term prosperity. It’s important to remember that if you’re in a financial bind, there’s no guilt in passing up opportunities. Instead, concentrate on paying your bills and maintaining your physical and mental well-being. You can always increase your investments later in life, if your career is more stable, your earnings are consistent, and your mind is at ease in general.
Is it possible for the bank to steal your money during a recession?
The good news is that as long as your bank is federally insured, your money is safe (FDIC). The Federal Deposit Insurance Corporation (FDIC) is an independent organization established by Congress in 1933 in response to the numerous bank failures that occurred during the Great Depression.
Is it possible for the government to see how much money you have in your bank account?
Many of your financial accounts are presumably already known to the IRS, and the IRS can find out how much money is in them. However, unless you’re being audited or the IRS is attempting to collect back taxes from you, the IRS rarely dives deeper into your bank and financial accounts.
The Internal Revenue Service (IRS) has a wealth of information on taxpayers. The majority of it comes from three places:
- Under your Social Security Number, information statements about you (Forms W-2, Form 1099, and so on) are filed.
Are banks allowed to take your money?
The Dodd-Frank Wall Street Reform and Consumer Protection Act. According to the law, a U.S. bank may take its depositors’ cash (i.e., your checking, savings, CDs, IRA, and 401(k) accounts) and utilize them to keep the bank solvent when necessary.
Should I keep my money at home or in the bank?
It’s considerably preferable to keep your money in an FDIC-insured bank or credit union, where it will earn interest and be fully protected by the FDIC. 2. If it is stolen or destroyed in the event of a robbery or fire, you may not be protected.
Are banks capable of losing your money?
Your money is safeguarded up to legal limitations whether your bank is insured by the Federal Deposit Insurance Corporation (FDIC) or your credit union is covered by the National Credit Union Administration (NCUA). This means that if your bank goes out of business, you will not lose your money.
Continue reading to learn what happens when a bank collapses and how you can get your money back.
How do you get your money back in a bank failure?
When your bank or credit union is on the verge of failing, the government looks for another organization to take over the failing one. The acquiring institution then creates new accounts for all of the customers, making it appear as if you just transferred your covered balance across.
Your direct deposits will be redirected to the other bank/credit union automatically. You will be able to write checks using your old account for a short time after the failure, but the new one should shortly send you replacement checks.
It’s likely that the FDIC/NCUA won’t be able to identify a bank or credit union to accept the funds. They will issue you a check to cover your insured deposits in this case. After your bank collapses, the FDIC and the NCUA both strive to return your insured funds within a few days. Your protected savings, as well as any interest collected up until the day your bank failed, will be returned to you.
While this insurance covers cash in deposit accounts such as checking accounts, savings accounts, money market accounts, and CDs, it excludes stocks, bonds, annuities, life insurance, and mutual funds, even if purchased through a bank.
What if your deposits exceed FDIC insurance limits?
As previously stated, the FDIC and NCUA have established a limit on the amount of deposits they will insure. Both provide up to $250,000 in coverage per depositor, per financial institution, and per kind of ownership. In most circumstances, this means you can retain up to $250,000 in a single account and still be covered. If you have many types of legal ownership for your accounts, this is an exception. Single, joint, and trust ownership are examples of ownership kinds.
If you deposit money into a single account, for example, you’ll be covered up to $250,000 at each bank. If you marry, you can open a second joint account with your spouse and deposit an extra $250,000 in a joint account while being insured.
So, what happens if your bank fails and you have more than the FDIC or NCUA-insured limits? The FDIC and NCUA will cover you up to the insured maximum in this scenario. Following that, you’ll be able to file a lawsuit against the collapsed institution. The government will be in charge of selling off the collapsed bank’s remaining assets in order to recoup as much money as possible, but there’s no assurance you’ll get your money back in full.
Let’s imagine you have $300,000 in a bank account that collapses. The FDIC will reimburse you $250,000, but whether you will receive any of the remaining $50,000 is contingent on the FDIC’s ability to sell the collapsed bank’s assets and at what price.
What is bank failure? What happens when banks fail
Your financial organization does not simply keep all of your money in a vault if you have a checking or savings account. While banks and credit unions keep some cash on hand to process withdrawals, they recognize that depositors are unlikely to remove their whole balance at once. As a result, they invest a portion of the deposits in small company loans or mortgages. When everything goes well, the bank makes a profit on its investments while still having enough cash on hand to process withdrawal requests.
Bank collapses can result from poor investment decisions. If a high number of borrowers go bankrupt and are unable to repay their mortgage loans to a bank, the bank will suffer a loss on the unpaid loans and may not be able to cover all of their deposits. This is one of the reasons why, following the 2008 housing collapse and financial crisis, so many banks closed.
If a financial organization loses too much money on its investments, it may not have enough assets to repay all of its depositors. To put it another way, they owe more than they have. When the government declares a bank to be insolvent.
How often do banks fail?
Every year, on average, seven banks close their doors. Only one bank failed in 2020, compared to four in 2019. Despite the fact that it was only the third year since 1933 without a single bank failure, no banks failed in 2018.
In comparison, during the Great Recession, 25 banks failed in 2008, 140 banks failed in 2009, and 157 banks closed in 2010. Even those figures, as seen in the graph below, are overwhelmed by bank closures in the late 1980s and early 1990s.
During a recession, where should I put my money?
Federal bond funds, municipal bond funds, taxable corporate funds, money market funds, dividend funds, utilities mutual funds, large-cap funds, and hedge funds are among the options to examine.