March 20, 2023
Is my money safe?
The run on a California bank brought the Bailey Brothers Building and Loan to mind. If you’re a fan of It’s A Wonderful Life, you probably remember the scene where George and Mary Bailey distribute their honeymoon savings to make sure the Building and Loan remains solvent. George explains to the townspeople:
“You're thinking of this place all wrong. As if I had the money back in a safe. The, the money's not here.
Well, your money's in Joe's house...that's right next to yours. And in the Kennedy House, and Mrs. Macklin's house, and, and a hundred others. Why, you're lending them the money to build, and then, they're going to pay it back to you as best they can.”
While banking is not that simple or straightforward, programs are in place to protect depositors.
For example, the Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 in qualifying accounts at FDIC-insured banks per depositor. If you have accounts at multiple FDIC-insured banks, each account may be insured up to the maximum. (In many cases, depending on how various accounts are titled, more than $250,000 may be insured at a single FDIC-insured institution.)
Last week, the Treasury Department, the Federal Reserve, and the FDIC augmented FDIC protections by introducing the Bank Term Funding Program (BTFP). The program offers one-year loans to banks, savings associations, credit unions, and other eligible depository institutions.
Participants in the program, “can pledge their assets such as bonds and mortgage-backed securities at par, or the value at which they were originally issued, instead of market value, giving banks a greater borrowing capacity since bond prices have fallen” reported Karishma Vanjani of Barron’s. The measure makes it possible for banks to avoid selling long-dated bonds at a loss when depositors withdraw money.
Federal Reserve officials indicated the BTFP provides enough financial support to protect all of the deposits in the United States, reported Craig Torres and Christopher Condon of Bloomberg.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Parks Wealth Management are separate entities from LPL Financial.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate, and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* This is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.
* These views are those of Carson Coaching, and not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm.
https://www.barrons.com/articles/stock-market-dow-nasdaq-s-p-500-5e86cfe6?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Barrons_The%20Stock%20Market%20Storm%20is%20Far%20from%20Over_1.pdf)
https://www.barrons.com/articles/treasury-bonds-haven-safety-banks-aee2abd4?mod=Searchresults (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Barrons_Treasuries%20Reverse%20Course%2c%20Rallying%20as%20Investors%20Seek%20Safety_2.pdf)
https://www.barrons.com/articles/federal-reserve-bank-bailout-program-8f6284f1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Barrons_Banks%20Didnt%20Flock%20to%20Feds%20New%20Funding%20Program_11.pdf)
https://www.bloomberg.com/news/articles/2023-03-12/us-moves-to-help-depositors-offer-bank-backstop-in-wake-of-svb (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/03-20-23_Bloomberg_US%20Backstops%20Bank%20Deposts%20to%20Avert%20Crisis%20After%20SVB%20Failure_12.pdf)