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October 26, 2009

October 26, 2009 – Many investors decided to buy gold and silver over the weekend because of the actions taken Friday by the Federal Deposit Insurance Corporation (FDIC). This government entity closed seven more of our nation’s banks last week, sending many investors with bank accounts into a panic. There have been 106 bank failures in 2009, and economists expect that this number could top 150 before the end of the year. There are over 400 banks on the FDIC’s "troubled" list, but the FDIC’s strict privacy laws prevent bank account holders from knowing which institutions are in danger of closing. Although there are hundreds of other failing banks, FDIC regulators have managed to avoid a public panic by quietly and selectively closing branches. Thanks to the FDIC’s $250,000 insurance policy on bank deposits, most investors have been spared a complete loss. These investors and others who fear that their bank may fail have converted surplus cash into gold and silver bars and investment-grade coins. These tangible investments may provide American savers with a better alternative to banks, or cash, over the long run.

Bank failures have cost the FDIC’s insurance fund $25 billion in 2009, and analysts expect US bank failures to cost $100 billion by 2013. Sheila Bair, the FDIC"s Chairman, has repeatedly warned Congress that the federal insurance fund has been exhausted. This is a scary scenario for the banks and individuals who thought that they were covered by the FDIC. Policymakers have refused to say how much debt the insurance fund is in, but they have insisted on making bold, but hollow, statements to the public. FDIC spokesman Andrew Gray said that his agency’s main mission is to maintain public confidence in our banking system. "As evidenced by the stability of insured deposits throughout last year, this mission has been a success," he said. Some may say that success is in the eye of the beholder, but more banks have failed this year than in any year since 1992, which is one of the reasons that so many investors have closed their banks accounts, and opted to store their wealth privately. Physical gold and silver investments are debt-free and can be stored privately, making them a prime option for these security-oriented investors. 

Shannon King

Senior Staff Writer – GoldSilver.org

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