Better than FDIC insured banks

[SlowDownFast]

The whole point of Treasury Direct is the return of capital in a situation where the SHTF. It is the bank of last resort, and it is well above FDIC in terms of its security as a cash park, the 4-week bills are hard to beat. They roll over as you'd think every 4 weeks; if you put equal amounts into each week of a 4-week cycle you can "cash out" any time you'd like, and until then, just roll it over.

Think of it as the Bank of Sealey backed by 6,000 nuclear weapons, with a 4-week maximum hold to extract it.

For small amounts of money, the Bank of Sealey is fine, and you ought to keep physical cash handy.

Think of T-Direct as a cash park with a bit of interest, and 100% safety beyond the $100,000 FDIC limits - unless the Fed government folds, in which case not much matters except steel, bras and lead.

There is an ETF for 4-week T-bills (there is still an intermediary between you and your money):
http://finance.google.com/finance?q=AMEX%3ABIL

For those wary of the ETF, go direct:
www.treasurydirect.gov

Be aware that it takes time to set up --time to have a safety plan--and so get started ASAP.

For amounts that you are uncomfortable defending with Smith and Wesson, let the Federal Government do it for you, and earn a bit at the same time.

If your bank shits the bed, you go to TD and change the destination bank for the redemption to a bank that is still standing. This can be in the US or outside the US. While all the banks are playing "Insolvency Musical Chairs," you can keep money out of the banking system until the ass/chair ratio approaches 1.0, and you know what is safe, and what is not.

If all the banks in the world are gone, then paying bills is the last thing on your "to do" list. Loot the Sportsman's Warehouse and grab all the guns you can.

edited for:
www.treasurydirect.GOV not .com

[sendero]

1. I've done Treasury Direct before...

.. and let me tell you it is a whipping. Safer perhaps, but there is paperwork and there are restrictions and I did it once and decided it was not worth it.

[SlowDownFast]

2. Paperwork and restrictions are a small price to pay

when banks start dropping like flies and/or you have over the $100,000 FDIC insured limit and/or the FDIC fails regardless how much you have in the bank.

But, that is why I also included the ETF equivalent of 4-week T-Bills.

If someone has the ability to safely store $100,000 or more (or less) in cash, without an intermediary, and have virtually immediate access to it in the event their bank bars the doors, I'd say "go for it".

[Celebration]

3. doomsday

Well, I am not discounting a doomsday scenario, but I think it is doomsday if FDIC fails. If FDIC fails then all bets are off, including treasury bills.

And, you are paying dearly for the perceived extra safety of the money. You are only earning 2.2% from the three month bills, versus 3.65% on CDs that are FDIC insured. (Schwab quotes as of today).

Since I think doomsday arrives if the FDIC fails, and treasuries are then suspect, I would choose the short term CDs.

[SlowDownFast]

5. What happens if there is a massive banking collapse?

Legislation provides the Federal Home Loan Banks with a "SUPER LIEN" on any bank assets if a member bank fails. This means the FDIC may not have enough funds to pay depositors after the FHLB Advances have been paid.

Superlien provided to FHLB by the FDIC. Covers FHLB against losses incurred by lending to the stupid insolvent banks like Countrywide and Citi.

The FDIC insures the Banks, not the depositors.

The depositors will have to get in line behind the FHLB to negotiate with the bank to get their "insured" deposits back.

Essentially, depositors are THIRD IN LINE for coverage.

It's all right here:

http://www.fdic.gov/about/learn/advisorycommittee/fhlb_advances.html

GSE's: Government Sponsored Entities

Here's some more *very* interesting reading:

The GSEs: Where Do We Stand?
http://stlouisfed.org/news/speeches/2007/01_17_07.html

If the depositor is now 3rd in line, and one of the banks that has gotten loans through FHLB goes TU and the collateral FHLB is holding is shit sandwich, THERE IS NOT ENOUGH MONEY IN THE FDIC TO PAY OFF FHLB AND THE DEPOSITORS. DO THE MATH!

NUMBERS DON'T LIE.

Secondly, the FDIC HAS THE RIGHT TO SEIZE AND CONFISCATE THE PREMISES AND PROPERTY OF ANY INSOLVENT BANK. This is for the purposes of merging, facilitating and ensuring that obligations are met and paid in the order prescribed by law. YOU'RE THIRD.

Poke around on the FDIC website I linked to. Read it for yourself. Also read how much reserves the FDIC is required to have. Refresh your memory about the size of the two loans we KNOW have been received from FHLB by Citi and MER (I think it was them) and then imagine what collateral was put up against those loans. Now, continue to do some math. Now, throw in the fact that we probably have no idea how many loans FHLB has given to those banks currently holding 23-A letters. THIS IS NOT TINFOIL. There is absolutely NO DOUBT the FDIC has the right to seize any insolvent bank and with it, your money. If there's nothing left of your money after they settle their priority lien with FHLB, you're FUCKED.

Now, let's have a nice rational conversation about where it might be prudent to put your money.

Look, if there is a full-on bank panic then you better have PHYSICAL currency.

There will be a "bank holiday" declared if this happens. Have enough to get through it.

The FHLB situation is serious and more than a bit scary.

I'm cogitating on exactly how best to protect from it. It may be that Treasury Direct is, in fact, the way to do so.

[Celebration]

6. Banking collapse

Like I said, doomsday can happen, but if it does, money in general will most likely become worthless, so those T bills won't be helpful.

I agree everyone should have some physical cash, but who knows how much it would be worth, if people don't trust its value. It might be better to have barter items--canned goods, rice, cigarettes, and plenty of whiskey.

Look, some bad stuff *could* happen but you can bet we would reflate out of the mess, and that hurts everything--T bills, bank deposits and physical cash.

They might try to pay us off with some Ameros. Who knows?

[SlowDownFast]

7. "worthless"

NO!

CASH WILL BE KING!

At least for some time.

A barter economy would quickly manifest, that's true. Precious metals might very well come into play. But, the dollar would retain it's value by having the currency of labor to back it up. Now the important thing is this: in a SHTF scenario, physical paper/fiat money would be swooped up out of the banks (which ones? Dunno yet.) by the FDIC (bank seizure) to insure the Federal Home Loan Banks. If you're bank is one of these, you're FUCKED. Doesn't necessarily mean you won't ever get it back, but it could be MONTHS. Maybe longer. PHYSICAL CASH WOULD BECOME SCARCE! People caught unawares and not having any way to withdraw their savings are FUCKED. What happens to them? Gov't supply stations and soup lines - but only in urban areas. BECAUSE PHYSICAL CASH WOULD BECOME SO SCARCE, IT WOULD BECOME PRICELESS!

Now, that wouldn't last forever, but it would last as long as it took to create some alternate form of currency, and/or some way to give the buck some footing.

But, until that is established, CASH IS KING, and the only way to protect it is put it in the Bank of Sealy and/or have it in T-bills, where you could get it transferred to a stable bank when the Insolvency Musical Chairs is over.

[Celebration]

8. This situation wouldn't last long

What about businesses that had their funds in the failed banks? How would they pay their workers? Well, they wouldn't you say. But if the funds were under the FDIC insured limit, there would be hell to pay if small businesses couldn't pay their laborers. So, there you have the collapse of the complete economy. Congress and the Fed would immediately step in and provide funds in this situation. Now the real risk is, that in doing so, they would risk hyperinflation of the currency. But they would do it anyway. All savers would suffer and that cash could be worth nothing.

I agree that T bills are slightly safer than FDIC money. But the interest differential is just too much for me. Our government will inflate rather than have people not have access to FDIC money. This doesn't have to do with legalities, but with political realities.

[SlowDownFast]

9. Which brings us back to gold........

and I have also advocated precious metal ownership here in this forum for a few months.

Will gold survive?

When/if gold becomes too expensive, will J6P turn to silver?

I'm not sure that anything will survive anymore, the deeper I venture into this rabbit hole.

But I'd rather have gold, silver, T-bills, and cash-in-hand than remain in the market (disclaimer: I own puts on major sub-prime financial institutions) or involved with banks in this climate.

And that's not speaking of gun, ammo, fuel and food stores I'm preparing.

With the market falling again on Friday, the Fed meeting on Wednesday, this will be the most interesting week yet, and we've only just begun.

The Reset is coming, come hell or high water or both.

[Celebration]

10. I don't know

I have lived a long time, and have lived through many doomsday scenarios that haven't taken place. Someday the doomsdayers will be right, and it could be in this decade. But there also could be yet another recovery.

And, puts are really expensive. I would rather buy the ETFs that go short. Then you don't worry about the exact correct timing so much. The markets are so manipulated-- it is a casino operation out there.

[Art_from_Ark]

13. They won't have to seize cash

they'll just print more of it.

[Dover]

15. Can ETFs fail too in an extreme default situation?

...When the dollar fails due to extreme defaults, the government will be pressured to offer a solution to the mayhem. It might offer reinflation fiats, but these will all fail (as they did in Weimer Germany). Since eventually there will be no confidence in fiats, government will need to offer something new, and probably something with a gold backing. The gold ETFs may or may not be a solution as extreme defaults may wipe out most brokerage accounts, and the ETFs may fail also due their derivative gold reserve (paper gold, not physical gold, see the prospectus for proof). The long-planned Amero may be offered with gold (that the US gave the IMF) backed SDRs from the IMF backing the Amero.


http://www.gold-eagle.com/editorials_05/moore031107.html

[143tbone]

17. What's the volume of $100,000 in cash--say hundreds? N/T

[InkAddict]

4. Love to see this page in Ozy's Latest Breakings SMR

http://www.treasurydirect.gov/NP/BPDLogin?application=np

[AnneD]

11. I'll look for it tomorrow ...

and post it if it isn't there. We love juicy tidbits and many folks read SWT and the Economy Forum.

[InkAddict]

12. Thanks AnneD n/t

[mac2]

14. Swiss banks behind Enron

http://onlinejournal.com/artman/publish/article_2592.shtml

Why aren't they investigating and demanding answers about those banks? What good is the WTO if it can't make sure money and trade are honest?

[143tbone]

16. Okay, so I just figured out what the Bank of Sealy is. Now do I dare ask

what is TD?
"If your bank shits the bed, you go to TD and change the destination bank for the redemption to a bank that is still standing. "

[143tbone]

18. Never mind-- TD--figured it out--duh N/T

[SlowDownFast]

19. LOL

Bank of Sealy = under your mattress

TD = TreasuryDirect

[SlowDownFast]

20. Kickin this to go with the Bank Solvency Issue thread. n/t

[liberalla]

21. I'm going to look into this... better than FDIC

I just read about Treasury Direct accounts somewhere else, and remembered this post...

kickin it for others to see again.

[Dover]

22. So who does one talk to about ETFs and getting into them?

A broker, financial planner....who?

I just don't think I have the whole picture about ETF, how to get in and how to get out.