OT: looks like tough times ahead for Stock Market?

wait till friday!!!

Temporary save by the "FEDS".

Someone has to pay for those loans..... China has threatened to sell 900 billion of US bonds. It will throw our economy into an automatic recession... Beware its only the beginning of our problems with the US stockmarket.

unfortunately not as easy as your argumentation seems:
- the whole investment world is using the subprime crisis to find a new level for price of risk
- the market realises that through asset backed securities the risk has shifted from known lenders to unknown market participants. so no bank trust actually no other bank about their exposure to highly leveraged credit risk. -> no lending between banks --> last week 94 billion euros from ecb to avoid financial crisis etc. ---> there is a (small) probability that within the next time the financial system gets a real naughty problem

.. one more (coming in just now from financial times):

Economic Outlook: Turbulence ahead as liquidity fears persist
By Chris Flood
Published: August 10 2007 19:53 | Last updated: August 12 2007 17:58
Investors are braced for a turbulent start to trading on Monday and this week’s data releases will take second place as fears over a liquidity crisis persist.

Last week saw a serious liquidity squeeze in money markets and short-term money rates spiked higher as institutions’ willingness to lend evaporated.

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“There is certainly a growing risk (that) the credit bubble is finally bursting,” said Tim Drayson at ABN Amro: “Right now, many financial markets are no longer functioning properly. Access to credit lines has been cut aggressively and sub-prime lending and leveraged loan markets appear to have shut down completely.”

gnfin, is the fed flooding the economy with money or are they just doing it temporarily.  If they are doing an over load with the money then we're in big trouble with inflation.   And as long as they are bailing out the rich guys, why don't they bail out all the rest of us and relieve us of our "sub-rich" mortgages.

Down over 200 on the DOW today....

Nikkei stock index down more than 400 points in morning trading+

Aug 15 09:52 PM US/Eastern
       


TOKYO, Aug. 16 (AP) - (Kyodo)—The key Nikkei 225 stock index fell more than 400 points at one point in the morning session on Thursday.
At 10:45 a.m., the Nikkei Stock Average stood at 16,050.22 -- its lowest level since late November -- down 425.39 points from Wednesday's close.

Hang on for the ride, we have just started down on the roller coaster, a pretty good chance we will see much steeper drops over the next couple of months, the sub-prime mess is starting to infect other areas.    

We have the magic of "Smoke And Mirrors" also know as the Fed.  I have a feeling they are secretly buying everything in sight starting about 30 to 40 mins before the market closes.  Who else would have the resources to pull off this day after day.   One day soon, all will start to unravel.

Short term - YES
Long Term _ NO

So true- We always heard this here on the site since day one. " watch the money flow". Will be interesting to see how things go this week. How long do bandaids stick?

More bad news?              http://biz.yahoo.com/ap/070822/mortgage_mess_jobs.html?.

Oil hit $80.00 yesterday. Beware... Iran will raise oil to $100.00 before we BOMB them.Fed will cut rates I believe.. Short term bandade. Fed dumping in money for liquidity.. There making it.. Printing it.. Beware Fed cant save this one. Too many signals were headind for resession.

       
AP Hits New Record on Refinery Outages
Thursday September 13, 11:08 am ET
By John Wilen, AP Business Writer
Oil Prices Set New Record, Gasoline Prices Rise As Hurricane Hits Texas Refineries


NEW YORK (AP) -- Oil prices briefly hit a record high and gasoline futures jumped Thursday as refiners reported production problems after Hurricane Humberto hit Texas.
Oil first traded over $80 a barrel on Wednesday after the Energy Department reported declines in crude and gasoline inventories and refinery activity last week.

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But in addition to supply concerns, Humberto and a developing storm in the Atlantic are supporting prices.

Valero Energy Corp.'s 325,000 barrel-per-day Port Arthur, Texas, refinery was shut due to a power outage. Exxon Mobil Corp. said its Beaumont, Texas, refinery suffered a minor production outage from Humberto.

Dow Jones Newswires reported that Port Arthur refineries owned by Motiva Enterprises LLC and Total SA were also shut down due to the power outage.

Traders appear more concerned about an Atlantic storm which the National Hurricane Center is calling Tropical Depression Eight. While the storm's course remains unclear, energy investors get worried any time a tropical storm or hurricane threatens key oil and gas infrastructure in the Gulf of Mexico.

Light, sweet crude for October delivery fell 22 cents to $79.69 a barrel on the New York Mercantile Exchange after rising as high as $80.20 earlier, 2 cents above the previous intraday trading record set Wednesday.

October gasoline rose 2.72 cents to $2.0432 a gallon in Thursday.

The front-month oil contract first surpassed $80 on Wednesday before settling at a record of $79.91 a barrel. Despite its gains, oil is still well below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.

Oil's runup has come despite OPEC's decision on Tuesday to boost output by 500,000 barrels, a move driven in part by concerns that high oil prices are hurting the global economy. Many analysts are perplexed by the high prices, arguing that they have been driven by a flood of speculative buying. Many believe demand does not support such high prices.

"The world economy in the last few years has shown to be quite resilient to strong oil pricing, but this is certainly a new territory for crude oil and if sustained there is bound to be some impact on the economy," said Victor Shum, an energy analyst at Purvin & Gertz in Singapore.

James Cordier, president of Liberty Trading Group in Tampa, Fla., notes that oil prices often peak in September, and follow demand lower in the fall.

"We're really wondering where demand will come from to support $80 crude oil," Cordier said.

In other Nymex trading, heating oil futures lost 0.21 cent to $2.217 a gallon, while natural gas lost 27.3 cents to $6.165 per 1,000 cubic feet after the government reported that inventories grew by 64 billion cubic feet last week, slightly more than the 62 billion cubic feet analysts had expected.

In London, October Brent crude fell 25 cents to $77.40 a barrel on the ICE futures exchange.

At the pump, meanwhile, gas prices slipped 0.7 cent overnight to a national average of $2.808 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May.

Analysts say much of the recent advance in crude prices has been due to buying by large investment funds.

"Most large financial institutions have gone long on crude, and each new high tested equates to substantial profits," wrote Simon Wardell, an energy analyst at Global Insight in London, in a research note.

But such jumps in speculative buying often carry their own seeds of destruction, notes Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill.

"At some point, a saturation level will be achieved as was the case at the end of July when the net long fund position peaked," Ritterbusch wrote.

After oil hit then-record trading prices above $78 a barrel on Aug. 1, futures dropped to the $69 level in a few weeks.

Despite oil's run, Cordier doesn't believe gas prices will rise substantially. Gasoline demand typically drops in the fall, and beginning Saturday, refiners will be able to sell cheaper winter-grade gasoline.

"Gasoline just really has a difficult time staying high this time of year," said Cordier.

Associated Press Writers Pablo Gorondi in Budapest and Gillian Wong in Singapore contributed to this report.





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Sponsor Results

Al-Qaida has revived, spread and is capable of a spectacular


· Stark warning from leading think tank
· Iran could have its own bomb by 2009
· Islamic countries radicalising at a pace

Richard Norton-Taylor
Thursday September 13, 2007
The Guardian


A man in the Philippines wears a T-shirt with a picture of Osama Bin Laden. Photograph: AP



Al-Qaida has revived, extended its influence, and has the capacity to carry out a spectacular strike similar to the September 11 attacks on America, one of the world's leading security thinktanks warned yesterday.
There is increasing evidence "that 'core' al-Qaida is proving adaptable and resilient, and has retained an ability to plan and coordinate large-scale attacks in the western world despite the attrition it has suffered", said the London-based International Institute for Strategic Studies (IISS). "The threat from Islamist terrorism remains as high as ever, and looks set to get worse," it added.

"The US and its allies have failed to deal a death blow to al-Qaida; the organisation's ideology appears to have taken root to such a degree that it will require decades to eradicate," it continued.

The warning came in the latest annual review of world affairs by the IISS. Its strategic survey paints a bleak picture of global security in the future and warned:

· Iran could have a nuclear weapon by 2009 or 2010, though this remains the "worst-case prediction";

· the US suffered a loss of authority as a result of the failure to impose order in Iraq. "The strategic hole the US found itself in [in 2007] did not have any obvious escape";

· there are serious doubts about the ability of Nuri al-Maliki, Iraq's prime minister, but any replacement would probably come too late to "halt the draining of American willpower to 'stay the course' ".

· that if climate change is allowed to continue unchecked, its affects will be catastrophic "on the level of nuclear war".

At a press conference launching the report, senior IISS analysts went further. Asked whether al-Qaida had the capacity now to carry out a 9/11-style attack, and whether it was stronger than in 9/11, Nigel Inkster, the institute's director of transnational threats and political risk, replied: "Both."

Mr Inkster, a former director of MI6 who was a candidate for the secret intelligence agency's top job three years ago, said there was much debate within al-Qaida after the September 11 attacks on the US. Many of its supporters believed the operation was a "tactical error", Mr Inkster said, because it led to the removal of a safe base - Taliban-controlled southern Afghanistan.

But the recent foiling of an alleged plot in Germany and the alleged airliner plot last year in Britain showed that al-Qaida had the ambition to carry out spectacular attacks while "strengthening" its "position in the badlands of north-west Pakistan", he added.

Pakistani groups were "aligning themselves with al-Qaida and the process of radicalisation within Islamic countries was continuing apace", he warned.

A number of "regional jihadist groups", notably in Iraq and the Maghreb (north Africa) had not only sworn formal allegiance to al-Qaida, but, more importantly, had begun to demonstrate ambitions beyond their parochial concerns in support of its global objectives, the IISS warned. It said that disrupted plots had pointed to a "continuing and worsening problem of radicalisation within Europe's Islamic diasporas - and the degree to which terrorists were still being directed by al-Qaida".

The institute's assessment of the terrorist threat reflects that of MI5 and MI6. There are 2,000 individuals engaged in 30 terrorist plots in 200 networks, according to British security and intelligence officials. They said earlier this year that al-Qaida had begun to regroup and that Britain was a prime target.

John Chipman, the IISS director general, said yesterday: "Western governments tend to meet the Muslim 'single narrative' [that the west is by definition anti-Muslim] by way of rebuttal, arguing against its basis in fact." That had to be addressed by encouraging non-violent responses, he said.

In contrast to this week's relatively upbeat assessments of the situation in Iraq by General David Petraeus, the US commander, and Ryan Crocker, the US ambassador to Baghdad, the IISS was sceptical about the ability of Iraq's prime minister to forge a national unity government after two key Shia parties and, more importantly, the main Sunni political bloc, quit.

"The US government is preciously close to running out of patience with Maliki," said Toby Dodge, a senior fellow at the institute.

The US might then back the Shia leaders of the Supreme Iraqi Islamic Council, political arm of the Badr brigade militia and rival of the radical Shia cleric, Moqtada al-Sadr, he suggested.

US difficulties in Iraq and loss of authority in the Middle East "provided a perfect setting for Iran to advance its regional and nuclear ambitions", the report said.

Climate change was also identified by the institute as a huge threat to global security. "Even if the international community succeeds in adopting comprehensive and effective measures to mitigate climate change, there will still be unavoidable impacts from global warming on the environment, economies and human security," said the report.

The report said the effects of the predicted rise in global temperatures due to the burning of fossil fuels would cause a host of problems including rising sea levels, forced migration, freak storms, droughts, floods, extinctions, wildfires, disease epidemics, crop failures and famine.





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Right on Buddy!

Oil hits record near $81 By Richard Valdmanis
Mon Sep 17, 5:19 PM ET



NEW YORK (Reuters) - Oil soared to a record near $81 a barrel on Monday on worries that global energy supplies could shrink to critical levels this winter heating season due to strong demand growth.

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Expectations that the U.S. Federal Reserve will agree to cut interest rates when it meets on Tuesday also supported oil and other commodities markets, raising the likelihood the economy will weather a U.S. credit crisis.

U.S. crude soared $1.78, or more than 2 percent, to a record $80.88 a barrel in electronic trade after having settled at $80.57 during the regular session. London Brent rose 76 cents to $76.98 a barrel.

Though oil prices have quadrupled since 2002, when adjusted for inflation the price is still below the $90-a-barrel peaks of the Iranian Revolution in 1979.

The Organization of the Petroleum Exporting Countries agreed on a small supply increase last week, but analysts said the decision to raise output by 500,000 barrels per day (bpd) from November 1 was not enough to reverse a rally that has lifted prices around 30 percent this year.

"We believe that this will be too little, too late, barring an outright collapse in demand, and now expect inventories to draw to critical levels this winter," said investment bank Goldman Sachs in a research note.

Goldman said it expected oil prices to hit $85 a barrel by the end of this year.

U.S. crude supplies are running at their lowest level in eight months while gasoline supplies in the top energy consumer were down at their lowest level since Hurricane Katrina knocked out several Gulf Coast refineries in 2005.

Analysts expect U.S. oil and gasoline supplies will fall further as recent storms in the Gulf of Mexico crimp imports and refinery operations.

Other commodities also shot higher on Monday, with gold reaching a 16-month high, supported by expectations of a U.S. interest rate cut that could increase investment flows.

The U.S. central bank will meet on Tuesday and experts expect it to agree to cut its benchmark federal funds rate by at least a quarter percentage point to help markets hobbled by a credit crunch.

"If the Fed (Federal Reserve) cuts rates this week the macroeconomic view could be seen as improving for energies, especially if the dollar remains under pressure," said Mike Fitzpatrick of MF Global.

Dollar-denominated commodities tend to strengthen when the dollar weakens against other currencies.

Oil was also receiving support Monday from fresh concerns over Iran's nuclear program.

France's foreign minister, Bernard Kouchner, increased pressure on Tehran on Sunday, saying France had to prepare for the prospect of war with Iran. Iran has called the comments provocative.

Oil's gains Monday were limited somewhat as Ingrid, the ninth named storm of the 2007 Atlantic hurricane season, was downgraded to a tropical depression.

Three refineries in Texas, shut by the previous Gulf of Mexico storm, Humberto, were working to restore operations.

(Additional reporting by Santosh Menon and Peg Mackey in London)

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When????? I sold all my stocks and now I wish I didn’t 
The market will not crush until all the big boys are out

OIL AT $82.00??? Going to $87.00 by end of month.

If your banks not a co operative bank the government insures your money up to 100 thousand dollars and money over 100 thousand in one bank you would loose if the bank crashs. So that is why many people invest their money into more than one bank not over 100 thousand. Old saying not keeping all your eggs in one basket. So if the market crashed you be protected up to 100 thousand

I've always had a question about this PrepGirl: What you're talking about is the FDIC banking insureance system. It basically says that everyone's savings are guaranteed for up to $100,000.

Here's my question: If here we have a run on our banking system, like what's brewing in the UK, only on a much larger scale, and banks begin to collapse because everyone is withdrawing their money, would the FDIC be able to bail people's savings out?

I'm of the opinion that they would not be able to, because the FDIC is part of the banking system. If more than two banks went Tango Uniform I don't think they'd be able to make up the difference and would end their protection ability, which would push even more people to begin attempting to withdraw their savings.

Here's a great example of how bad our inflationary problem is getting: The US and Canadian dollars are at the exact same value (Within five cents) and with the fifty point cut by the fed, which fuels inflation, the Canadian dollar is only going to more valuable, while the US dollar heads for the toilet.

We're entering a situation where if this slumping dollar keeps up we're not just going to have inflation, we're going to have a hyperinflative currency, which is far worse than another great depression as then not even the rich people will have anything, and there's absolutely no possibility of anything being able to bail our economy out. This is getting very interesting, very interesting indeed...
    

    Turboguy,
Very good question. I will ask my boss tomorrow at work.
Since this has never happen in my time. I too would like to know how far does the FDIC cover the public up to 100 thousand dollars if all the banks are crashing. I know my bank that is a co operative bank insures all money in full over 100 thousand. I will find out.
PrepGirl
.........................................................
What does it mean if an account is "FDIC Insured"?

Today an individual can have up to 100 thousand dollars in any one financial institution and have insurance from an organization that's a subdivision of the United States government that will guarantee the deposit up to 100,000 thousand dollars for an individual. The insurance is from the - the acronym is the "FDIC" which stands for the Federal Deposit Insurance Corporation, and that's for commercial banks and most banks. This coverage is for any monetary deposit where the bank owes you the money. So it would be a savings account, checking account, money market account, certificate of deposit. Where a lot of people are confused however, is that is doesn't cover other products that you might buy from your bank. So for example if you ended up purchasing a mutual fund from your bank, then that would not be covered by any kind of insurance, and so it is important to understand what your buy - if you don't understand it have it explained.
.........................................................




Member FDIC.

Those rushed syllables at the end of bank commercials stand for the Federal Deposit Insurance Corporation, which in turn stands for a promise that Joe Average's money is safe in the event of bank failure. The FDIC, which insures deposits in member banks and thrifts for up to $100,000, was created in response to the banking crises of the Great Depression. Headquartered in the District of Columbia, the FDIC has regional offices across the country. The FDIC is managed by a five-person board of directors, all of whom are appointed by the US President and confirmed by the Senate.

.........................................................


Federal Deposit Insurance Corporation - FDIC


The U.S. corporation insuring deposits in the U.S. against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.

Investopedia Says:
The FDIC will insure deposits of up to US$100,000 per institution as long as the bank is a member firm.

Before opening an account with a financial institution, be sure to check that it is FDIC insured.

.........................................................
Federal Deposit Insurance Corporation (FDIC)

Federal agency established in 1933 that guarantees (within limits) funds on deposit in member banks and thrift institutions and performs other functions such as making loans to or buying assets from member institutions to facilitate mergers or prevent failures. In 1989, Congress passed savings and loan association bailout legislation that reorganized FDIC into two insurance units: the Bank Insurance Fund (BIF) continued the traditional FDIC functions with respect to banking institutions and the Savings Association Insurance Fund (SAIF) insured thrift institution deposits, replacing the Federal Savings and Loan Insurance Corporation (FSLIC), which ceased to exist. In 2005, Congress passed the FDI Reform Act merging the SAIF and BIF into one insurance fund called the Deposit Insurance Fund (DIF). The same law also raised the federal deposit insurance level from $100,000 to $250,000 on retirement accounts and gave the FDIC the option to increase insurance ceilings on regular bank accounts from $100,000 by $10,000 a year, based on inflation, every five years thereafter starting April 1, 2010. See also Office of Thrift Supervision

.........................................................
Federal Deposit Insurance Corporation (FDIC)


A public corporation, established in 1933; insures up to $100,000 for each depositor in most Commercial Banks and Savings and Loan Associations. Has own reserves and can borrow from the U.S. Treasury.
Example: The First National Bank becomes insolvent and cannot pay depositors who want to withdraw their money. The FDIC pays each depositor the full Principal amount, up to $100,000, if a merger with a healthy bank cannot be arranged

.........................................................
Federal Deposit Insurance Corporation

(FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. The corporation was established in 1933 to prevent a repetition of the losses incurred during the Great Depression when bankrupt banks could not return the money deposited in them. It is managed by a five-member board of directors, appointed by the president with the consent of the U.S. Senate. The FDIC provides coverage for deposits in national banks, in state banks that are members of the Federal Reserve System, and in other qualified state banks. (Mutual funds and other securities are not covered.) It may also make loans to insured banks in the interest of protecting the
depositors. The corporation derives its income from assessments on insured banks and interest on government securities. Since 1989 the FDIC has supervised the Savings Association Insurance Fund, the agency that was created to provide coverage for savings and loan associations when the Federal Savings and Loan Insurance Corporation became insolvent. A sharp increase in bank failures in the late 1980s and early 1990s led to the insolvency (1991–92) of the FDIC as well, forcing it to seek government loans. The fund recovered by the mid-1990s.


--------------------------------------------------------------------------------
Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation (FDIC) was created on June 16, 1933, under the authority of the Federal Reserve Act, section 12B (12 U.S.C.A. § 264(s)). It was signed into law by President Franklin D. Roosevelt to promote and preserve public confidence in banks at the time of the most severe banking crisis in U.S. history. From the stock market crash of 1929 to the beginning of Roosevelt's tenure as president in 1933, nine thousand banks closed their doors, resulting in losses to depositors of $1.3 billion. The FDIC was established to provide insurance coverage for bank deposits, thereby maintaining financial stability throughout the United States.

The FDIC is an independent agency of the government. Its management was established by the Banking Act of 1933. It consists of a board of directors numbering three members, one the comptroller of the currency, and two appointed by the president with approval of the Senate. The two appointed members serve six-year terms, and one is elected by the members to serve as chair of the board. The headquarters of the FDIC is located in Washington, D.C., and the corporation has thirteen regional offices. Most employees are bank examiners.

The FDIC does not operate on funds from Congress. The capital necessary to start the corporation back in 1933 was provided by the U.S. Treasury and the twelve Federal Reserve banks. Since then, its major sources of income have been assessments on deposits held by insured banks and interest on its portfolio of U.S. Treasury securities.

Besides administering the Bank Insurance Fund, the FDIC is also responsible for the Savings Association Insurance Fund (SAIF), which was established on August 9, 1989, under the authority of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) (12 U.S.C.A. § 1821 (2)). The SAIF insures deposits in savings and loan associations.

The FDIC also insures, up to the statutory limitation, deposits in national banks, state banks that are members of the Federal Reserve System, and state banks that apply for federal deposit insurance and meet certain qualifications. If an insured bank fails, the FDIC pays the claim of each depositor, up to $100,000.

The FDIC may make loans to or purchase assets from insured depository institutions in order to facilitate mergers or consolidations, when such action for the protection of depositors will reduce risks or avert threatened loss to the agency. It will prevent the closing of an insured bank when it considers the operation of that institution essential to providing adequate banking.

The FDIC may, after notice and a hearing, terminate the insured status of a bank that continues to engage in unsafe banking practices. The FDIC will regulate the manner in which the depository institution gives the required notice of such a termination to depositors.

From 1980 to 1990, a total of 1,110 banks failed, principally owing to bad loans in a slowly weakening real estate market and risky loans to developing countries. The FDIC found itself in such financial straits that in 1990, Chairman L. William Seidman testified before Congress, "The insurance fund is under considerable stress" and is "at the lowest point at anytime in modern history."

The FIRREA and the FDIC Improvement Act of 1991 (codified in scattered sections of 12 U.S.C.A.) came as reactions to the savings and loan crisis and to a banking crisis of the 1980s, which together cost the U.S. taxpayers hundreds of billions of dollars.

FIRREA gave the FDIC authority to administer the SAIF, replacing the Federal Savings and Loan Insurance Corporation (FSLIC) as the insurer of deposits in savings and loan associations. The FDIC Improvement Act placed new restrictions on how the corporation repaid lost deposits. Before the act, the FDIC deemed it necessary to repay all deposits, whether or not they were at an insured bank or over $100,000, in order to protect public confidence in the nation's financial institutions. Since the act, it must take a "least-cost" method of case resolution. The act stipulates that the FDIC will not be permitted to cover uninsured depositors unless the president, the secretary of the treasury, and the FDIC jointly determine that not doing so would have serious adverse effects on the economic conditions of the nation or community.

.........................................................

Federal Deposit Insurance Corporation


The FDIC logoThe Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. The vast number of bank failures in the Great Depression spurred the United States Congress into creating an institution which would guarantee banks, inspired by the Commonwealth of Massachusetts and its Deposit Insurance Fund (DIF). The FDIC provides deposit insurance which currently guarantees checking and savings deposits in member banks up to $100,000 per depositor.

In recent years, a new product called "CDARS" Certificate of Deposit Account Registry System, invented by a retired Comptroller of US Currency, allows customers to obtain $30 Million in FDIC insured deposits, by authorizing the customer's bank to make deposits in other FDIC insured banks.

The FDIC deals with insolvency/illiquidity in one of two ways:

Payoff Method, in which insured deposits are paid by the FDIC, which attempts to recover its payments by liquidating the receivership estate of the failed bank.
Purchase and Assumption Method, in which all deposits are assumed by an open bank, which also purchases some or all of the failed bank's assets.

History

Inception
During the Great Depression, Republican Senator Arthur Vandenberg and Democratic Representative Henry Steagall wanted to restore public confidence after a massive series of bank runs in early 1933 caused 4,004 banks to close, with an average of $900,000 in deposits. These banks were merged into stronger banks; many months later the depositors received about 85% of their money.

In May, the U.S. House Banking and Currency Committee reported a bill to insure deposits 100 percent to $1,000,000, and after that on a sliding scale; it would be financed by a small assessment on the banks. However the U.S. Senate Banking Committee reported a bill that excluded banks that were not members of the Federal Reserve System. Senator Vandenberg rejected both bills because neither contained a ceiling on the guarantees. He proposed an amendment covering all banks beginning using a temporary fund and a $2,500 ceiling. It was passed as the Glass-Steagall Deposit Insurance Act in June with Steagall's amendment that the program would be managed by the new Federal Deposit Insurance Corporation. Led by Chicago banker Walter J. Cummings, Jr. the FDIC soon included almost all the country's 19,000 banking offices. Insurance started January 1, 1934. President Franklin D. Roosevelt was personally opposed to insurance because it would protect irresponsible bankers, but yielded when he saw Congressional support was overwhelming. As the second head of FDIC in early 1934 he appointed Leo Crowley, a Wisconsin banker who, Roosevelt soon discovered, was using the FDIC to cover his own embezzlements. After some anguish, Roosevelt kept Crowley on and hushed up the episode, which was first revealed in 1996.[1]


S&L and bank crisis of the 1980s
Federal deposit insurance received its first large-scale test in the late 1980s and early 1990s during the savings and loan crisis (which also affected commercial banks).

The brunt of the crisis fell upon a parallel institution to the FDIC, the Federal Savings and Loan Insurance Corporation (FSLIC), created to insure savings and loan institutions (S&Ls, also called thrifts). Due to a confluence of events, much of the S&L industry was insolvent and many large banks were in trouble as well. The FSLIC became insolvent and, along with its insurance function, was merged into the FDIC. Thrifts are now overseen by the Office of Thrift Supervision, an agency that works closely with the FDIC and the Comptroller of the Currency. (Credit unions are insured by the National Credit Union Administration.) The primary legislative response to the crisis were the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and Federal Deposit Insurance Corporation Improvement Act of 1991.

The cost to taxpayers of resolving the crisis has been estimated at $150 billion.


FDIC funds
On February 8, 2006, President George W. Bush signed The Federal Deposit Insurance Reform Act of 2005 (the Reform Act) into law. The Federal Deposit Insurance Reform Conforming Amendments Act of 2005 which the President signed into law on February 15, 2006, contains necessary technical and conforming changes to implement deposit insurance reform, as well as a number of study and survey requirements. Among the highlights of this law was merging the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) into a new fund, the Deposit Insurance Fund (DIF). This change was made effective March 31, 2006.

There were two separate FDIC funds; one was the Bank Insurance Fund (BIF), and the other was the Savings Association Insurance Fund (SAIF). The latter was established after the savings & loans crisis of the 1980s. The existence of two separate funds for the same purpose led to banks attempting to shift from one fund to another, depending on the benefits each could provide. In the 1990s, SAIF premiums were at one point five times higher than BIF premiums; several banks attempted to qualify for the BIF, with some merging with institutions qualified for the BIF in order to avoid the higher premiums of the SAIF. This drove up the BIF premiums as well, resulting in a situation where both funds were charging higher premiums than necessary.[2]

Then Chairman of the Federal Reserve Alan Greenspan was a critic of the system, saying that "We are, in effect, attempting to use government to enforce two different prices for the same item — namely, government-mandated deposit insurance. Such price differences only create efforts by market participants to arbitrage the difference." Greenspan proposed "to end this game and merge SAIF and BIF". However, the government was not responsive; the Deposit Insurance Funds Act of 1996 made a provision for merging the two funds, but this was not enacted.[3]


Insurance requirements
In order to receive this benefit member banks must follow certain liquidity and reserve requirements. Banks are classified in 5 groups according to their risk-based capital ratio:

Well capitalized: 10% or higher
Adequately capitalized: 8% or higher
Undercapitalized: less than 8%
Significantly undercapitalized: less than 6%
Critically undercapitalized: less than 2%
When a bank becomes undercapitalized the FDIC issues a warning to the bank. When the number drops below 6% the FDIC can change management and force the bank to take other corrective action. When the bank becomes critically undercapitalized the FDIC declares the bank insolvent.


FDIC insured items
FDIC insurance covers the following types of accounts:

Checking accounts, Negotiable Order of Withdrawal, also called NOW accounts (checking accounts that earn interest), and money market deposit accounts, also called MMDAs (savings accounts that allow a limited number of checks to be written each month.)
Savings accounts that you can add to or withdraw from at any time.
"Money market" accounts, essentially high-interest savings accounts (the name is similar to "money market funds" which are not insured).
Certificates of deposit (CDs), which generally require you to keep funds in the account for a set period.
Outstanding Cashier's Checks, Interest Checks, and other negotiable instruments drawn on the accounts of the bank.
Accounts at different banks are insured separately. One person could keep $100,000 in accounts at two separate banks and be insured for a total of $200,000. Also, accounts in different ownerships (such as beneficial ownership, trusts, and joint accounts) can be considered separately for the $100,000 insurance limit. The Federal Deposit Insurance Reform Act raised the amount of insurance for an Individual Retirement Account to $250,000.


Non-FDIC insured items
Only the above types of accounts are insured. Some types of uninsured products, even if purchased through a covered financial institution, are:

Stocks, bonds, mutual funds, and money market funds.
Investments backed by the U.S. government, such as US Treasury securities
The contents of safe deposit boxes. Even though the word deposit appears in the name, under federal law a safe deposit box is not a deposit account - it's a well-secured storage space rented by an institution to a customer.
Losses due to theft or fraud at the institution. These situations are often covered by special insurance policies that banking institutions buy from private insurance companies.
Errors made in your accounts. In these situations, there may be remedies for consumers under state contract law, the Uniform Commercial Code, and some federal regulations, depending on the type of transaction.
Insurance and annuity products, such as life, auto and homeowner's insurance.


Hope there are no errors i did copy and paste the best i could to answer your questions Turboguy... found all of this on the internet. Hope it answers everyones questions.

Prepgirl

Here in the UK only the first £2000 is guaranteed 100% then 90% of the next £32,000 so if you had savings of £33000 you could potentially lose 10% - If you have more then this is not guaranteed -  Hence the queues.

The bank of England has now said that at the bank in question it will secure 100% of ALL savings kept - So actually its is now the safest place to put a large amount of cash!