Bank Fails. Is this a single case or the first trickle of a tide.

[De Selby]

The Bank has a fiduciary relationship to the people whose money it holds-it should be held accountable for this sort of clearly foreseeable disaster.

The problem with this particular incident is that when someone "in power" makes a widely disseminated public statement that a bank is going under, even institutions like Bank of America or Washington Mutual couldn't handle all their depositors making a run on them demanding all their money in a matter of days. Banks don't just keep all that money sitting around in a vault.

That being said, as ilbob mentioned, don't keep more money in a bank than it has FDIC insurance to cover.

True, but that's apples and oranges-this bank failed because of spectacularly bad financial decision making, using money that was mostly not the personal property of the decision makers.  It's a different situation when the bank fails due to its own negligence, versus the effect of rumor.

[De Selby]

Because a scam artist is straight out lying to you about what he's buying with your money. This is different than an institution that makes high risk investments, with full knowledge of all the participants.

The problem is that the bank is supposed to provide the experts-depositors aren't financial gurus for the most part, and can't (and aren't supposed to) know all the intricate details of what a bank is doing with their money.  The bank has a duty, in turn, to act with that money in a responsible fashion...telling people who aren't experts in your scamming techniques that you will scam them doesn't change that.

Now if you honestly told the customers "These loans will likely never be repaid, and the odds are good that you'll never get your money back and that our bank will eventually fail" in explicit terms, I would agree with you...but no financial institution ever puts it that way when it's soliciting an investment.  And describing the activity any other way really conceals the risk from the investor/depositor.

Note on your questions about my personal views:  Not only am I not a socialist, if you review my posts, you will find not one single line to support the "screw the rich" attitude.  It's hard for me to respond to that questioning because I don't have any such views, and have never expressed such views on this board or elsewhere.

[drewtam]

You are incorrect, the investor (or depositor) should not rely on banks as their financial expert or adviser. The bank "expert" would have a significant conflict of interest. The wise investor should only rely on a trusted 3rd party financial expert who cannot gain money based on advise.

http://www.educatedinvestor.com/webcontent/lc/listTuts.jsp?on=Brinker&name=Investment%20Analysis

Bob Brinker on Money Talk
If your parents talk to you about sex, your lucky. If your parents talk to you about finances, your even luckier.

I was a really blessed kid. But thats what you get with a mom who is a Certified Public Accountant.

I deduced your views on wealth redistributions from other threads such as:

Obama's plan is to decrease taxes for most individuals, while raising taxes for a smaller percentage of individuals to compensate.

So he's a tax cutter and a tax increaser-the vast majority of Americans will see a tax cut from an Obama administration, though.

It sounds like you support raising taxes on the "wealthy", and lowering taxes on the "poor", i.e. wealth redistribution, i.e. socialism. But if thats not really your position, then you don't make your views very clear.

[De Selby]

You are incorrect, the investor (or depositor) should not rely on banks as their financial expert or adviser. The bank "expert" would have a significant conflict of interest. The wise investor should only rely on a trusted 3rd party financial expert who cannot gain money based on advise.

Yeah, but that doesn't really change the bank's obligations to deal fairly with the customer's money.  The wise investor also checks to see that his contact isn't a scam artist; but if the wise investor doesn't do that, it doesn't mean no crime was committed by the scammer.  Just like it's still a crime to steal from an unlocked house-yeah, it's wise to lock your doors, but that doesn't make theft less criminal.

It sounds like you support raising taxes on the "wealthy", and lowering taxes on the "poor", i.e. wealth redistribution, i.e. socialism. But if thats not really your position, then you don't make your views very clear.

Okay, you quoted what I consider to be an accurate recital of Obama's platform on taxes. 

How does that constitute "support for taxing the wealthy and giving money to the poor"?

I pointed out a fact: For most people, Obama's plan involves cutting taxes.  That isn't my position, that is a restatement of what Obama's position is on these issues.  My position is that it's not true to call Obama a blanket tax increaser-that in fact, his plan is to cut taxes for the majority of individuals.  That is a simple fact which you can verify on your own; it is not "my position" or an endorsement of socialism.

Why is it that even accurately reciting a candidate's position is "support for socialism" or whatever you want to call it? 

[Ben]

It's a different situation when the bank fails due to its own negligence, versus the effect of rumor.

True enough, however the rumor drastically accelerated the failure to the detriment of bank customers. Without Schumer's help, the bank may still have failed, but failure might have occurred in a slower, more structured manner that would have spared many of their customers.

[Manedwolf]

Washington Mutual Inc.

Last: 3.17-1.78 -35.96%

Ouch. They going to be the next one down the tube?

Lehman Brothers analysts in a report Monday said WaMu could be forced to "substantially" boost its reserves to cover an estimated $28 billion of losses on the balance sheet, with $21 billion coming from mortgages.

[Headless Thompson Gunner]

Washington Mutual all along has been on the short list of banks expected to fail.  It shouldn't surprise to anyone that WaMu is in trouble.  Although, to hear it from Lehman Bros is a bit ironic, as Lehman is also on that short list. 

[drewtam]

Looks like Fannie execs were liars and thieves. If its true, I hope they fry. Thieves of this scale should get the death penalty. Petty felons and mass murders can't do the kind of damage these kind of thieves cause.

http://blog.heritage.org/2008/07/14/morning-bell-the-lefts-crony-capitilism-exposed/

In 2004, after a tip from a whistle blower who was later fired, the Office of Federal Housing Enterprise Oversight (Ofheo) issued a report finding that the government-sponsored entity Fannie Mae had engaged in Enron-like accounting machinations that allowed Fannie to overstate its earnings and underestimate the risk the company faced. The accounting wizardry Fannie engaged in was designed so that Fannie could meet profit targets to maximize bonus payments to company executives like Clinton administration deputy attorney general Jamie Gorelick and Carter administration assistant director for domestic policy Franklin Raines.

I guess I mis-interpreted your statements. I thought you were defending his ideas of wealth redistribution.

[thebaldguy]

Generally speaking, most of the top executives never get in trouble when these financial institutions fail. They only people who suffer are the employees and customers.

A good rule of thumb is to never keep more than $100,000.00 in a bank. Of course, banks will never tell you that. In the IndyMac failure, people are getting 50 cents per dollar on accounts over $100,000.00,