March 9th, 2011
Dime Bankwas established way back in 1869. They weren’t FDIC insured until 1960. That is pretty remarkable. I read an article where someone theorized that increased FDIC insurance entices banks to take more risk? What do you think? I’ll leave some comments below. Here is the data you came for. :O)
|Star Rating:||4 (****)|
|Address:||290 Salem Turnpike|
Norwich, CT 06360
Dime Bank prior to 2004 was Dime Savings Bank. They are classified as a savings and loan which really doesn’t make much difference these days. Ask for the disclosures if you are considering a long-term CD. It is wise to check the early withdrawal penalty clause. The short-term rates aren’t anything to write home about, but the 5-year is pretty good. They also offer a 5-year Bump=up CD that has a higher rate than their normal 5-year Term.
Okay, back to my initial question. Does increased FDIC insurance allow a bank to take more risks? Although, the FDIC is backed by the full faith and credit of the US Gov’t, the insurance fund is funded by the banks themselves. The FDIC has begun to make some of the assessments risk based and depending on various factors that have an extra assessment for brokered deposits. So if a bank took more risk or turned a blind eye to their brothers-in-arms (other banks) they would be opening themselves up for higher insurance premiums.
Secondly, as many, many banks and their stockholders have discovered, taking undue risk puts their money at risk. When a bank is closed by the FDIC, the stockholder capital is wiped out. If you were one of the investors and had maybe $25,000 (or more) in their stock, that money is gone.
In my opinion increased FDIC insurance is really a convenience for you and me. It allows us to keep larger sums at the bank and makes our money management easier. This is especially true for institutional investors. Institutions often have over that amount and it makes their CD management much easier and more efficient. Instead of needing five banks for every $500,000, they only need two now.
It could also help with rates as demand increases. Since not as many banks are needed for large portfolios, they will need to offer higher rates than their competitors. So overall, I believe the increase in FDIC insurance is a positive development. What do you think?
We do offer CD placement services. Check us out. CD Rate Servicecd :O)
-- By +Chris Duncan