Moody's Cuts Outlook on U.S. Banking System
Moody's lowered the outlook for the U.S. Banking System, to negative. Moody's cited: "rapidly deteriorating operating environment".
As one who has been an owner, organizer and investor in banks, a report like the above is something not to be ignored.
The first thing to do, is go to your bank and ask for a detailed balance sheet. If the bank assets, liabilities, are out of balance, or look risky, or have changed rapidly, then review if the bank is profitable, and how much in "reserves" the bank has. Has the "accounts of funds set aside for loan losses increased?" That might be a red flag to pay attention to. Why? Who are the bad borrowers? What loans are in danger of losses, or how many loans are considered "classified as substandard or high risk".
Years ago, banks all distributed their balance sheets and made them available in bank lobbies, as a form of "transparency and full disclosure". In recent years we have noticed that
many banks no longer make their financial statements as available. Ask your banker for their "financial statement" and review the liquidity and reserves of your bank,
What is the "reserve for loan losses" at your bank? Ask your banker in person or by a letter, and see how he reacts. Has it been increasing a lot in the recent quarters? Other questions, how about other reports, "Are your loan losses increasing? How fast are loans increasing as a percentage of other categories? Ask your banker what is the "mix" of loans. For example is there is an imbalance of a certain kind of loans? Has the bank has increased it's type or kind of loans to one category or sector, you may want to know if your bank has a high risk in one part of loans.
If you have more than $250,000 deposited in your bank you might want to be sure your deposits are distributed to several banks, so that each bank insures $250,000. Ask you banker or the FDIC how to increase your insurance. For example if you have a deposit in your bank, and your wife has another deposit, there may be a way to set these accounts up so you can get $500,000 total FDIC insurance on your deposits. Ask the FDIC or check the FDIC website to see how you might increase or multiply your "FDIC insurance on deposits"
Of course the Federal Reserve, the US Treasury, and the US Treasury, are working hard to keep the U.S. Banking system safe. But the nature of banking, is that the key assets:
INCREASE CONFIDENCE. If a bank loses confidence from its investors or depositors, a lack of confidence is a powerful risk factor for the security and stability of a bank.
Take the time and effort to keep your funds in safe and well managed banks. Keep your funds in banks at $250,000 or below, or at least until the current wave of uncertainty settles down. Keep your savings and bank deposits safe! Ben Boothe