Please read the two articles below. There is definitely some useful information in terms of what happens when a bank goes out of business and what happens to your deposits. Two major points I took away from these articles is that the FDIC does not disclose problem banks and unfortunately the only way to truely protect your cash is to diversify into multiple accounts, the now insured money market accounts and treasuries.  

Life after your bank fails
For small businesses with six-figure sums socked away, a bank failure can be a devastating blow.
bY Stacy Cowley    
September 28, 2008: 10:09 AM ET

NEW YORK (CNNMoney.com) — When recruiting consultant Fran Quittel heard on her car radio one Friday afternoon in July that her bank, IndyMac, had been seized by federal regulators, she was surprised but unworried. An IndyMac customer for five years, Quittel had both personal accounts and business accounts at the bank, but she was confident her accounts contained less than the $100,000 insured by the Federal Deposit Insurance Corp.

But as Quittel delved into her banking details that weekend, she got an unexpected shock. Her business savings account was temporarily sheltering a chunk of funds awaiting deposit into her 401(k), and her business checking account still contained the money for an uncashed payroll check. The combination pushed the total stored in her business accounts over $100,000 - and when federal regulators closed IndyMac, Quittel immediately lost access to a portion of her uninsured funds.

“I didn’t realize how fragile the bank was,” said Quittel, the owner of Frances Quittel Inc. in Emeryville, Calif. “If you’re a small-business owner, you have cash moving in and out of your accounts all the time - you’re putting in money to pay for taxes, to pay health insurance premiums, to pay for retirement account fundings. It just doesn’t occur to you that you’re playing Russian roulette.”

Many small businesses run close to the bone, and don’t have six-figure sums stockpiled at the bank. For those that do, the risk of a bank failure remains remote: Washington Mutual (WM, Fortune 500) was the 13th bank to fail this year, out of 8,500 banks in the U.S. The FDIC had 117 banks on its watch list at the end of last quarter, representing a small sliver of the industry.

Money.Cnn.Com - Click for Complete Story

Problem bank list keeps growing
FDIC says list of troubled banks in 2nd quarter grows to 117 with $78 billion in assets - up from 90 banks, $26 billion in assets in 1st quarter.

By David Ellis and Tami Luhby, CNNMoney.com staff writers
Last Updated: August 27, 2008: 10:19 AM EDT
    
NEW YORK (CNNMoney.com) — The number of troubled banks on the government’s watch list grew dramatically last quarter.

The Federal Deposit Insurance Corp. reported Tuesday that the number of firms on its so-called problem bank list grew to 117 during the second quarter - its highest level since the middle of 2003. There were 90 banks on the problem list in the first quarter.

FDIC Chairman Sheila Bair expressed little surprise at the increase and warned that the number would grow. “More banks will come on the list as credit problems worsen and assets of problem institutions will continue to rise,” said Bair in a press conference.

The number of troubled institutions has moved steadily higher this year - nearly doubling from 61 at the same time a year ago - as banks across the country struggle to cope with the fallout in the housing market and rising loan losses.

Problem banks typically face difficulties with their finances, or are suffering through operations or management issues that pose a threat to their existence.

Banks included on the problem list are considered the most likely institutions to fail, although few institutions actually reach that point - just 13% of banks on the FDIC’s problem list have failed on average.

The FDIC, one of the top regulators of the nation’s banking system, doesn’t reveal the names of the banks on the list, but it does give the total assets of these institutions.

Money.Cnn.Com - Click for Complete Story

    I think most people are wondering at this point what is going on. It seems that our economy and business as we know it continues to crumble. Major banks and investment firms have faded into history. Now, the wolf is at the door and we are all left to wonder if it will hold.

    Many people will and have lost their jobs, many others have lost their retirement. Will punishing companies that are struggling help or taking back wall street bonuses put the $100s of billions of dollars we have lost back in to the market ? The easy answer, no.

    The really enemy here , the thing we should be most angry with is with our regulators and commitees that were created and paid to provide oversight. The problem is everyone had their hand in the cookie jar, and when times were good, it was one big cookie jar! Like any good snack it taste good at the time but soon you are hungary again.

    In this instance the cookies were mortgages that increasingly were given to people who did not have the means to repay such obligations. And not only did they not have the means but they were also given bad loans with outrageous rate resets. Money was also given freely to speculators, more often then not people with very little experience , who were looking to ride the gravy train.

   Lets fast-forward to the presence though because what is done is done, we just need to fight for tighter regulation going forward. Otherwise , as they say, ” history is doomed to repeat itself.”  A brief summary to provide some scope of our current situation; Bear Stearn’s is gone, Lehman Brothers is bankrupt, Washington Mutual is gone, Merrill Lynch will probably merge with Bank of America, Indy Mac is gone, Fannie Mae and Freddie Mac our in conservatorship, the government has more or less bought AIG, and Citibank has written off billions of dollars in assets.

   Now I hear people talk and I think many have this perception that in the past couple years this has happened. I think George Bush has let us down just as much as the next guy, but these companies have been operating dangerously for years in order for them to have so much of their companies worth tied up in assets that have no collateral. Greed , and the constant lack of the SEC to ensure that common shareholders are protected from poorly run companies. Especially those capable of halting the entire U.S. economy.

   What’s the good news you are wondering. It is a great time to investment. Their are some such as General Electric and Bank of America that have hit some real lows. Also, Research in Motion got hammered with a downgrade last week that as a technology person is completely unjustified. It is like their is a file sale in the stock market and the people with long-term vision will profit handsomely. *PLEASE NOTE THIS IS NOT A RECOMMENDATION TO MAKE AN INVESTMENT WITHOUT YOUR OWN DUE DILIGENCE AND OR SEEKING PROFESSIONAL ADVICE.

   On that note, I believe it will get worse before it gets better. I believe paying off debt is now more important than ever. I do think the bailout plan will pass and regardless of who gets elected our taxes will go up. Between the bailout plan, the war and the overall lack of financial control in Washington, there is no other way for this nation to continue operating unless we generate more cash. With that please see my poll below and cast your vote.  -Matt

[poll id="3"]

  AP
House GOP leaders endorse $700B financial bailout
Sunday September 28, 9:07 pm ET
By Julie Hirschfeld Davis, Associated Press Writer 
House GOP leaders say they’ll endores $700 billion market bailout, press colleagues to back it

WASHINGTON (AP) — Congressional leaders and the White House agreed Sunday to a $700 billion rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House for a vote Monday.
 
The plan, bollixed up for days by election-year politics, would give the administration broad power to use billions upon billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.

President Bush called the vote a difficult one for lawmakers but said he is confident Congress will pass it. “Without this rescue plan, the costs to the American economy could be disastrous,” Bush said in a written statement released by the White House. He was to speak publicly about the plan early Monday morning, before U.S. markets open.

Flexing its political muscle, Congress insisted on a stronger hand in controlling the money than the White House had wanted. Lawmakers had to navigate between angry voters with little regard for Wall Street and administration officials who warned that inaction would cause the economy to seize up and spiral into recession.

A deal in hand, Capitol Hill leaders scrambled to sell it to colleagues in both parties and acknowledged they were not certain it would pass. “Now we have to get the votes,” said Sen. Harry Reid, D-Nev., the majority leader.

Finance.Yahoo.Com - Click for Complete Story

     So the government continues down the rock slope of buying up, insuring and loaning out billions of dollars of money they do not have to buy assets , equities , loans , etc, that really never had any value. As the market began to crash, these off the book assets became impossible to move. When an asset can not be sold it has to be written off. You know where  it went from here.

     What are the results, the governement is now the Warrent Buffet of the world, owning a huge insurance company, AIG, the two largest US mortgage companies, Fannie Mae and Feddie Mac, and soon a company that will own all the bad debt that got us in to this mess. And forget about tender offers, they can print their own money.  I support a free market and business, but it blows my mind that our accounting laws and SEC oversight are so loose that companies were permitted to keep these mammoth assets off their books. If companies were forced to keep these investments on the balance sheets, and also have them limited to by cash and tangible assets this would never have happened.

    So where does that leave people like you and I ? I do not know about you but it leaves me nervous and waiting to see what things look like when the dusts settles. However , reading the article below I have to agree that you will see inflation and higher interest rates. So if you want to get ahead of the game, start cutting back spending and saving up some extra cash.

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Biggest Bailout Ever: Did the Government Go Too Far?
Posted Sep 19, 2008 10:39am EDT by Henry Blodget in Newsmakers, Recession, Banking

After a few weeks of trying to stand tough in the face of demands for a wholesale rescue, Hank Paulson apparently couldn’t take it anymore. So now we’ll have the biggest bailout in history, including:

A huge RTC-like government garbage can that banks can throw all their toxic balance-sheet waste into. (This time, the transfer will be made before they go bankrupt, unlike the case with the first RTC -a.k.a. the Resolution Trust Corp., a government agency created in the late 1980s to liquidate the assets of failed Savings & Loans)
A temporary ban on shortselling. (With the unfortunate implication that shorts are the cause of all this)
A federal guarantee on money-market accounts. (Including non-recourse loans to banks to buy high-quality commercial paper and meet money-market obligations.)
Not surprisingly, the market’s up huge on this news. The moves should head off a run on money-market funds, restore liquidity to the financial system, and, as bank analyst Tom Brown puts it in the accompanying video, create a general “time out” for the panic to recede.

1 - So what are the costs? Almost certainly:
2 - Higher taxes
3 - Higher interest rates on government debt
4 - Bigger government deficits

Finance.Yahoo.Com - Click for Complete Story

Reuters
Goldman Sachs net plunges 70 percent
Tuesday September 16, 9:09 am ET
By Joseph A. Giannone
NEW YORK (Reuters) - Goldman Sachs Group Inc (NYSE:GS - News) said third-quarter earnings plunged 70 percent as one of the market’s worst slumps ever sapped revenue in almost every business while fueling investment and credit losses.
 
The largest U.S. investment bank reported net income of $845 million, or $1.81 a share, for the quarter ended August 29, down from $2.85 billion, or $6.13 a share, a year earlier. Net revenue fell by half to $6.04 billion from $12.3 billion.

“To think that any financial firm can avoid being scathed by this meltdown is naive,” said Walter Todd, portfolio manager at Greenwood Capital Associates in Greenwood, South Carolina.

The earnings beat analysts’ sharply reduced expectations of $1.75 a share, but revenue fell short of the consensus forecast of $6.3 billion, according to Reuters Estimates.

In trading before the bell, Goldman shares fell more than 5 percent to $128.13 a share, their lowest level in two an a half years.

Finance.Yahoo.Com - Click for Complete Story