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Warm Fuzzies or FDIC
Written by Steve | Published: |
Do you remember as a kid ever being scared in the night thinking you saw a weird shadow or heard something in your closet or under your bed?
Then after running to mom & dad’s room and frantically waking them up, they would “check” under the bed and in the closet and let you know that everything was ok and you could safely go back to bed.
It did seem to help…right?
But did they actually do anything???
This is similar to what FDIC insurance does for our banking system.
Banks pay for FDIC insurance so they can say in the event of our failure you will receive up to at least $250,000.
The problem is where does that FDIC “guarantee” come from. If you do a web search on FDIC being fully funded you will quickly find that FDIC is short of its exposure by 99%.
This means that they would have to turn to the Treasury and thus the Federal Reserve to collect the funding for FDIC insurance.
So essentially if FDIC had to pay its obligation, the Treasury/Fed would have to print more money just to get you your money back.
Do you see any problems with this?
Wowzers!
They pass around a lot of “warm fuzzies” but are actually getting rid of the monsters under the bed?
In these volatile financial times it is important to do a health checkup and actually start to block and tackle some of these “monsters” and “shadows” we all have to navigate through right now.
