Great Depression II

 | September 17, 2008 10:28 AM

I am old but not old enough to remember a financial period as bad as this one.  I do remember a time when interest rates were around 20% and both inflation and unemployment were high too.  But the news these days is so bad and reminding me of the Great Depression where for the first time we are losing faith in our financial institutions.

I have two places where I keep my money, Washington Mutual (WaMu) and GE Interest Plus.  Today’s news about WaMu is bleak.

The embattled thrift Washington Mutual say its health shouldn’t be judged by its stock price, and it isn’t going to go the way of Lehman Brothers…

Late Monday, the thrift clarified the reasoning behind a downgrade by ratings agency Standard & Poor’s, which cut WaMu’s credit rating to junk territory on Monday. The ratings service cited the thrift’s exposure to the mortgage securities market, downgrading it to BB-minus from BBB-minus. Yet, the ratings service did say the thrift has enough cash to get through 2010. The change in S&P’s ratings follows a similar downgrade by fellow ratings service Moody’s last week.

WaMu Defiant –

Today’s news about GE is pretty dismal also.

General Electric Co shares tumbled nearly 10 percent on Wednesday as investors became panicky about how its massive financial arm was faring in the wake of the troubles at top financial institutions…

GE’s 6 percent first-quarter profit drop, which stunned investors who had been looking for growth, came at another time of market turbulence following the near-collapse of Bear Stearns.

J.P. Morgan analyst Stephen Tusa in a note to clients said he now expects the conglomerate’s financial arm, which accounts for about half its profit, to see profits fall 5 to 10 percent in 2009.

GE shares tumble amid financial worries | Reuters

The news does not stop there.  Morgan Stanley, Goldman plummet as crisis mounts.

I am now faced with a big decision, do I move my money out of GE Interest Plus which is not FDIC insured?  Do I move my money out of WAMU which is FDIC insured but what does FDIC insured really mean?  If WAMU suddenly closes it doors how long will take to get my money?  What bank is “safe” during this financial crisis?

4 Responses to “Great Depression II”

Topher wrote a comment on September 18, 2008

My FA told us to make sure that cash type accounts should be in FDIC accounts and no more that 100K in each account.

According to the news, if a bank fails, the FDIC ensures that your money is available the next business day, assuming you can get to your account.

Topher wrote a comment on September 18, 2008
Topher wrote a comment on October 6, 2008

How did we get into this mess? Have a listen of these two shows. These are great, this is the best source that I’ve got that explain all this well.

About the subprime mortgage meltdown:
This American Life “The Giant Pool of Money”

This one is about the credit crunch:
This American Life “Another Frightening Show About the Economy”

Topher wrote a comment on October 9, 2008

Here’s another link on leaning about the finance crisis.

Care to comment?