Is Your Savings Account "Too Big to Fail"?
October 01, 2009
"Too big to fail" must be considered the phrase of the year, due to its extreme adoption rate and impermeable imprint upon American society.
In Washington, new rules are being discussed that will hold banks judged "too big to fail" to new and different standards.
What does this mean for your saving accounts?
You Only Lose Money When the Government Goes Out of Business
What is essentially happening, then, is that government is deciding which banks are ready and willing to become "too big to fail."
Even if that appellation means paying higher insurance to the FDIC or needing to maintain higher capital ratios than smaller banks, the too big to fail mantra may advantage the biggest banks in the world.
And it may advantage you, too, if you possess larger than average deposit accounts, such as sizeable savings accounts or Jumbo CDs.
Basically, by holding your biggest assets at the biggest banks, your deposits will be "spoken for" by the full faith and credit of the U.S. Treasury.
Small Banks the Real Winners?
To then go and say that smaller banks or credit unions will be the big beneficiaries of the too big to fail new rules seems absurd.
But it may be true. Smaller banks, with smaller or even non-existent buearacracies, may be able to offer higher interest CDs.
