>>Well, if FDIC or SIPC (is that the right acronym?) go down the tubes -- we are all in deep $#@!>>
>>Not something I'm going to stay up at night worrying about. >>
Agreed.
Just that I have been following the Long-Term Capital Management debacle with interest, and dread. It appears that they leveraged less than $4 billion in assets into positions in excess of $1 trillion. Not good collateral, from a creditor's standpoint, and I would say the institutions that allowed them to do so were in breach of their fiduciary duties to their shareholders. I hope that this is an isolated incident, but I fear that it is business as usual.
There is much talk now about the "moral hazard" of bailing out bad investments - - that it encourages investors to take unnecessary risk. Don't FDIC and SIPC encourage us to be less than diligent in our choice of banks and brokerages?
So, I ask myself, do the financial institutions in which I have my capital stashed measure up?
I note with some trepidation that my bank really blurs the line between bank and investment house. I deal only with the banking side, and use other brokers, but am under regular pressure (like, every time I make a large deposit) to use their investment advisors, and invest my cash with them, rather than with the bank. Of course, FDIC won't insure that, and they probably would get around to telling me that, but I wonder whether someone not as educated or worldly would realize what that meant.
Well, it's hard to imagine bank failures in the good old US of A. |
