The feds pull a bank job in Ogden

I spent all Friday and Monday following the Centennial Bank meltdown. As always, there’s way more than you can push into even 32-inch stories.

For example: I was amazed at the brutal precision of it all. Workers at the bank had to know the bank had issues, but the comings and goings at the Ogden branch looked dead-normal Friday until about 5:45 p.m., 15 minutes to closing time, when I suspect the word went out that something was up. I walked into the building and saw all the clerk and staff standing around, looking very much like people waiting to be shot.

– The closure had one comic aspect. A bevy of state troopers showed up at 5:59 p.m. or thereabouts, by my watch, escorting three guys with FDIC name tags. They were met at the door by someone from inside the bank — a state official? — who said they were ahead of their agreed upon time.

So the troopers and FDIC guys obediently filed out. The troopers even drove across the street and parked, waiting five minutes before everyone came back again.

– After that, they came in waves. Richard Schmalzer, the FDIC ombudsman who came to Ogden from Chicago to handle this, told me Monday that they do, indeed, stage at a nearby parking lot until the official closure is sent to them via e-mail, at which point everyone is sent a signal to go to the bank and start work. He said they intentionally go in waves about half an hour apart so the parking lot isn’t one giant mob scene at 6 p.m. sharp.

– I felt especially bad for the bank employees, who had little clue, until 6 p.m., that they were out of  jobs. They have temp work for a few weeks helping the FDIC close things up but after that, they’re outa there. The FDIC will do to Centennial what Rome did to Carthage.

– This is a good reminder, as if we needed one, that this is not as safe and secure a world as we’d like to think it is. The FDIC is a wonderful palative, making us thing that, no matter how bad things get, we’re secure. Our savings are insured.

That’s good and bad – the FDIC system is a major bulwark against a vastly worse financial disaster. Bank runs and bank closings in the 1930s was a leading cause of massive fiscal upset in Utah and elsewhere. People forget, in 1933, one third of all Utahns were out of work and on federal relief. When Utah banks failed then, and several did, people’s money disappeared.

On the other hand, security can make people less cautious. If you know the fed has your back, you get sloppy, as we have seen with the “too big to fail” banks.

– This is just another reminder, then, that it is best not to keep all your eggs in one basket. I have my own savings, such as they are, in a couple different credit unions and other savings diversified as much as possible. I haven’t quite gotten to the stage of burying a cache of gold coins in the back yard, but there are days I wonder if that wouldn’t be a bad idea.

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2 Responses to The feds pull a bank job in Ogden

  1. flatlander100 says:

    “it is best not to keep all your eggs in one basket.”

    Clearly so. One of the things I find amusing in the current mess [in a gallows humor sort of way] is how some banks, like Centennial and Barnes, got into trouble by ignoring the advice nearly all bankers used to give to their customers: diversify. Do not rely too heavily on one kind of investment. And yet Barnes and Centennial went under when they wrote, I gather from the papers, a huge proportion of their loans for commercial property developments. If that particular sector went under, as it did, they were going to go under with it, as they did, having limited investments in other areas to rely on.

    If I had gone to one of their investment advisers and told them I had 90% of all my investments in one stock, or even one group of stocks, they’d have told me I was nuts and to diversify and to do it fast. While the very bank they worked for was ignoring that same sound advice.

    Go figure.

  2. CLiechty says:

    I like the comment that people may be less cautious about their money. I believe that individuals need to be informed about making sure their money is covered by FDIC insurance. Base coverage is $250,000, but with the right structuring, one account can be covered up to millions of dollars. This is due to the fact that each depositor (not account) is insured at each FDIC-insured bank up to $250,000. If a couple holds an account, the total is $500,000 in coverage. If dependents are listed –let’s say the couple is married and they have three children–then the children would count as dependents separately for each parent. That makes eight separate depositors and the funds are insured up to $2 million. See the following calculator provided by the FDIC to see what your total coverage at one institution is.
    It’s also important to note that credit unions are covered by the NCUA, not the FDIC. NCUA insurance is similar in principle, but the rules may be different.

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