Not since the Great Depression started with the stock market crash of 1929 and followed by an immediate run on the banks has there been such doubt in areas such as "trust," "accountability," etc., when it came to where we put our precious money.
The best long-term investment for all Americans was home ownership. That too has gone away from our trusted beliefs.
Our investments, assets, cash and everything else of value is now on the line. There is a chance that most of it will evaporate right before our eyes and there is nothing we can do about it. Most of this started with the sub-prime mortgage hustle. It has turned out to be a bigger monster than most of us imagined.
One of the biggest examples is IndyMac Bank. This company is a spin off of Countrywide (one of the biggest firms involved in the sub-prime mortgage scam).
Countrywide took its finest products and birthed the Independent Mortgage Acceptance Corporation, hence the name IndyMac. According to Thomson Financial, Indy was the second-largest mortgage lender in the United States, and the seventh largest savings and loan, with $32 billion in assets and $19 billion in deposits and $1 billion uninsured.
It was the biggest bank failure in years. Since 2000, according to the FDIC, there have been 32 bank failures in the United States, with IndyMac the fifth one so far in 2008 and bigger than all the other 31 put together. Those depositors with more than $100,000 stand to lose all above the $100,000 threshold. If you had $800,000 in IndyMac you stand to only come out with $100,000.
The rest is a big gamble and most likely at least 50 percent will be lost by the depositor.
Remember, only $100,000 in deposits is insured by the FDIC. There is no bank, investment brokerage anywhere that will guarantee you more than the initial $100,000. This is not security.
The real scary part is that the FDIC has another 90 to 150 banks on its list of "troubled" lenders. Is your bank on that list? You can't tell as the FDIC is keeping it a secret to prevent you from running the bank and causing it to collapse like IndyMac. Yes, the times are indeed changing and neither you nor I know what to do. The government, Congress, Wall St. and others are going in circles and are at a loss on what to do. You and I are at the bottom of this and will be the ones most hurt.
Don't think you can avoid this by running to a major bank. They have troubles too. Wachovia Securities, formerly AG Edwards and now a division of the 4th largest bank in the nation — Wachovia Corporation — is now having difficulty in its daily business. The Secretary of State of Missouri, after receiving hundreds of complaints from customers who were denied access to their cash, sprung a raid on this brokerage last week. Her intent was "to make the investors whole." This looks like the next big horror story.
The equity in your home, the American Dream, is going up in smoke with the rising tide of foreclosures. Even if you have your home free and clear, you are still at risk. For every foreclosure within two miles of your home you will lose approximately $7,000 in net equity. It doesn't take long for this to start mounting up and chipping away at your family's future.
What is going to happen to our retirement accounts and life insurance policies? These two industries have long been investing in the above areas and they must be taking a beating right now.
When the "Baby Boomers" start retiring and cashing in on long-term life insurance policies, will they be in for a major shock also? Probably, as the pain is being spread throughout the world.
Harry Alford is the co-founder, President/CEO of the National Black Chamber of Commerce. Website: www.nationalbcc.org.