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Letters: Are The Banks Safe?

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Letters: Are The Banks Safe?

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Letters: Are The Banks Safe?

Letters: Are The Banks Safe?

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Personal finance columnist Liz Pulliam Weston explains whether credit unions or banks are the safer place to deposit your cash during tough economic times.

LYNN NEARY, host:

It's Tuesday, the day we read from your letters, and we'll get to those emails and blog comments in a moment. But first, we wanted to finish a conversation we started last week with Ambassador Richard Holbrooke. He was talking about the meeting he had with Radovan Karadzic in Belgrade. This was in 1995 as NATO airstrikes finally forced Bosnian Serbs to negotiate. Karadzic, of course, went onto become one of the most wanted men in the world until his capture last Monday on charges of genocide and crimes against humanity.

If you caught that conversation, you know that we ran out of time before the ambassador could respond to one final question from a listener. Lucha (ph) called in from Florida and explained that he's a survivor of the killing at Srebrenica. During the Bosnian war, he watched members of his family loaded onto a bus and disappear. The caller said he was lucky that day. He doesn't know why but he escaped through a wire fence of the United Nations. Lucha had this question for Ambassador Holbrooke.

(Soundbite of NPR's Talk of the Nation, July 23, 2008)

LUCHA (Caller): I know you are a main negotiator from United States, and not just from United States, from whole world, you represent human being, human kindness at this time. And all ours life it was in your hand. Did you know - did you have anything on your heart, what's going to happen in Srebrenica before these negotiations that Ratko Mladic and Radovan Karadzic - did you know what's going to happen in Srebrenica? Or these two monster, the monster, the devil that was lying to you, did you have any promise from them? Please give me answer from bottom of your heart.

NEARY: Ambassador Richard Holbrooke was the chief architect of the Dayton Peace Agreement that ended the Bosnian war. He joins us now on the phone. Thanks so much for joining us again, Ambassador Holbrooke.

Ambassador RICHARD HOLBROOKE (U.S. Ambassador to the United Nations): Delighted to be with you, Lynn.

NEARY: And we wanted to give you a chance to really fully respond to that question.

Amb. HOLBROOKE: Yeah. I can feel the pain in Lucha's voice and I share it. And my answer to Lucha is very simple. Speaking just for myself, I was concerned that Srebrenica was a catastrophe waiting to happen. It was a Muslim town in a valley surrounded by Serb gunners, and it was exposed in the most isolated place in the country. About six weeks before the genocide took place in Srebrenica, I happen to be at a conference with the queen of the Netherlands. And I sat next to her at dinner, and I said to her, Your Majesty, do you realize that your troops are in the most dangerous place in Europe, in the most exposed situation? And I drew on a napkin a picture of the deployments, and I said, please talk to your government about this. I talked to many other people about it.

The Queen told me a year later when I saw her at another conference that she'd never forgotten that conversation, and she had followed up on it, and it later became public. But to go back to Srebrenica, when the Dutch troops were in that valley, I pleaded with the Dutch government, directly and through their ambassador, to allow NATO airstrikes to come in on top of the Bosnian Serbs. But the NATO forces, and particularly the Dutch government, wanted to get all their troops safely out of Srebrenica before there was any bombing. Of course, with the removal of the troops, a slaughter became inevitable.

All of you listening who know about Dutch politics and history know that this was the greatest trauma the Netherlands has suffered since the end of World War II. There've been investigations. There've been books. There've been tremendous discussions. And the Dutch feel deeply the tragedy that took place. And I understand their pain. They - the U.N. should have reinforced Srebrenica, not withdrawn those troops. It was the final act of the failure of the international peacekeeping force, the U.N. peacekeeping force. And it was - it led directly to the negotiating mission which I was put in charge of and which would begin just a few weeks later.

NEARY: Is it painful for you to hear that kind of question from someone like Lucha?

Amb. HOLBROOKE: Of course. It's painful to anyone. I personally did everything I could to prevent this from happening. So, I don't feel personally responsible, but of course I understand Lucha's pain and I can - I've met it many, many times. This was a greatest collective failure of the West since the 1930s, and it came to a climax in that valley of Srebrenica. I've been in Srebrenica now several times since. Muslims have moved back. About the third of the population or more is already Muslim. The Serbs who relocated there have no business being there. And gradually, slowly, much too slowly, there's - they're making some limited progress, but it'll never be the same.

NEARY: And just to bring things up to date, rightwing Serbs have called for an anti-government rally in Belgrade to protest the extradition of Karadzic. Do some still view him as a hero?

Amb. HOLBROOKE: Yes, there are people who view him as a hero, I regret to say, and these are people who are mired in a mythic past, a past which does not reflect the interests of the Serb people and drags them all into an involvement with something that is disgraceful and tragic. Karadzic was the most evil, terrible person I've ever met, worse than Milosevic in most ways, worse even than General Mladic, although the Mladic was the hands-on murder of Srebrenica.

There were other generals who were murderers. Karadzic was the intellectual architect of racial, ethnic cleansing. And let's be clear, ethnic cleansing is a euphemism for racist genocide. So, this demonstration you're talking about is unfortunate. But as far as I can tell, the vast majority of the Serb people are ready to move on and start the process of joining the European Union. In the end, Serbia has to choose between its past and its future. If it chooses its past, it can cling to a kind of a mythology about the past, but it's not going to get it anywhere.

NEARY: Ambassador Holbrooke, thanks very much for joining us.

Amb. HOLBROOKE: Thank you, Lynn.

NEARY: Ambassador Richard Holbrooke was the chief architect of the Dayton Peace Accord.

(Soundbite of music)

NEARY: And now we'll read from your emails. The economy seems to be on everyone's mind these days, and we took some time last week to ask about your economic indicators. How do you measure the state of the economy? And what does it tell you?

Jane Tierney (ph) sent us this note. I manage a youth-recreation program for a fairly affluent suburb of Minneapolis. Our program mainly caters to families with working parents, so we have kids before and after school in the school year and all day long in the summer. The kids are here because the parents are at work. In our suburb, we know the economy is slowing down because more kids join the program. Former stay-at-home moms are going back to work to keep the family income up and are sending kids to our program.

Another listener, Liz in Oklahoma City, added her economic indicator. I'm a psychotherapist at the acute-care psychiatric hospital, and I've seen our daily census rise throughout the past few months, with more and more patients reporting situational factors, as opposed to chronic mental illness, as the primary factor leading to their admission. Many of these patients have been laid off and are facing financial pressures like foreclosure, loss of healthcare, et cetera.

And finally, a correction. A week ago, we talked about America's history of bank panics. IndyMac Bank had just failed, and we saw reports of angry customers lining up outside branches to withdraw their cash. But it wasn't the banks that many of you emailed about. It was the question asked by a listener about credit unions.

Ted Griffith emailed from Wilmington, Delaware, to complain. A guest on Talk of the Nation just provided some info that's not quite right. Credit unions aren't covered by the FDIC, but their deposits have, in effect, the same coverage through a different federal agency. The caller who was told to check to see if her credit union is covered by the FDIC is probably going to be confused.

There was also a question about whether credit unions or banks might be safer to deposit your money during tough economic times. So, to help us get to the bottom of these, we've called on our money pal Liz Pulliam Weston. She's a person finance columnist for MSN Money, and she wrote the book "Deal with Your Debt." She's with us from the studio at NPR West. Liz, thanks so much for coming in today.

Ms. LIZ PULLIAM WESTON (Columnist, MSN Money; Author, "Deal with Your Debt"): It's a pleasure. Thank you, Lynn.

NEARY: And to our listeners, if you have questions about credit unions, this is your chance to ask an expert. 800-989-8255 or send an email to talk@npr.org. So, Liz, maybe we'll begin with the basics. What exactly is a credit union? And how does it compare to a bank?

Ms. WESTON: Credit unions are member-owned financial institutions. So, they're not in business to make a profit for their shareholders. They're basically in business to help their members. And you generally can get better interest rates from them. You have to belong to a certain group in order to belong to a credit union, but typically the definitions are pretty broad. And there's actually a website called joinacu.org where you can check to see if you qualified to join a credit union. You probably do.

NEARY: Now, most people do know that the FDIC, the Federal Deposit Insurance Corporation, covers deposits in banks up to 100,000 dollars. What we now know is the FDIC does not cover credit unions. But what agency does cover credit unions?

Ms. WESTON: All federal credit unions and most state-chartered credit unions are covered by the National Credit Union Share Insurance Fund, which is mouthful.

NEARY: Mm-hm.

Ms. WESTON: But it's an insurance fund ran by the National Credit Union Administration, which is a federal agency, and like the FDIC, you're insured up to a 100,000 dollars per depositor per credit union, under that fund. And you can get coverage up to 250,000 dollars for certain retirement accounts.

NEARY: We are talking with personal finance columnist, Liz Pulliam Weston, and I do want to remind everybody that you are listening to Talk of the Nation from NPR News. So, is one institution safer than the other, a bank versus credit union, or...?

Ms. WESTON: Well, the banks are having a harder time coping right now. The credit unions didn't get the same exposure to the mortgage mess that the banks did. But if you're concerned about the health of your credit union or your bank, I'd go do a little digging. There are lots of ways that you can check on the health and safety of your financial institution. One place I like to go is bankrate.com. They have something called a safe-and-sound measure that sort of takes all the filings that banks and credit unions have to make and translates them into a star system so you can get a feel for how strong your particular institution is.

NEARY: I just want to ask. Did you say how we know that the - that banks are - our deposits in bank are insured up to 100,000 dollars. Is that the same for credit unions? Is it up to 100,000?

Ms. WESTON: Yeah, it's a 100,000 dollars, is the basic insurance amount, and for both banks and credit unions that are covered by insurance, you also have a separate coverage of amount up to 250,000 dollars for certain retirement account, like IRAs.

NEARY: Yeah. What other areas of service, from credit unions versus banks, rates, fees, that sort of thing?

Ms. WESTON: You generally see lower fees and better interest rates at credit union. Again, they're member-owned, so they don't have to make the profits to show their shareholders that banks do. And you now have a lot of the advantages with credit unions that used to be just something you found at banks, like one of the old knocks against credit unions was, well, they don't have those big ATM networks. Well, now most of them do. They've banded together and you actually have access through many credit unions to 25,000 different ATMs. A lot of ATMs will credit you for the fees that you pay at other, you know, non-network ATMs if you happen to, you know, need money and can't get to one.

And they're generally the place that most people find when they're looking for a good rate on auto insurance. That's sort of the stepping stone in the credit unions. You hear from a friend that says, you know what? You really should check our credit union and see what the rate is on those auto loans. And then they realize, hey, I'm getting a better rate on my checking account. I can, you know, borrow money more easily. I get more money on my savings. Maybe I better sign up and become a member.

NEARY: So, do you feel like the - Liz, do you feel like the sort of, oh, panic is not the right word, but the sort of nervousness around banks has died down a little bit at this point?

Ms. WESTON: No, I don't think so. I think people are very concerned. I'm starting to get more emails now saying, how do I know if - how am I - if I'm insured? How do I figure out the insurance amount? Because it can be incredibly complicated. It depends on the insurer. It depends on the type of account. And I will usually just send people to the FDIC or the NCUA websites, because they explain how the shares or the accounts are insured. And they have interactive calculators that can help you figure out how much you're insured for. And we have been hearing from analysts and others, even regulators, that there are going to be more bank failures. I think more people have this on their mind.

NEARY: Well, you know, whenever I'm talking about this and, you know, I hear about the - your deposits in banks are insured up to 100,000 dollars, part of me always thinks, well, why would you have 100,000 dollars in the bank in the first place?

(Soundbite of laughter)

Ms. WESTON: The people I intend to hear from tend to be older. A lot of them survived the depression. They don't like to have their money in the stock market, or they like to have a significant chunk somewhere they feel safe and it's fairly liquid. And that tends to be a bank or a credit union. And a lot of people don't want to split up their money. They might have 500,000 dollars in savings, but that's all they have in the world. And rather than break it up among different banks or different credit unions, they've got it all in one place. And that's fine if your credit union or bank is safe and sound. But these days, I'd be a little extra cautious and just make sure that you're insured for as much as you think you are. And if you've got excess, maybe look at another bank or credit union. Spread it around a little bit.

NEARY: All right. Let's see if we can get call in from Jackie, and she's calling from Clarkston, Michigan. Hi, Jackie.

JACKIE (Caller): Hello. How are you guys today?

NEARY: Good. Go ahead.

JACKIE: Well, my question was I have about a little bit over 10,000 dollars in CDs in my local credit union. If the credit union was to fail at all, would I be out the 10,000 dollars or is that covered?

Ms. WESTON: If your credit union is covered by this insurance fund I've been talking about, you would be totally covered, and the chances are very good that it is. All federal credit unions and the vast majority of state-chartered credit unions are covered by the National Credit Union Share Insurance Fund. If you're not sure, though, go to the ncua.gov site and check it out. They will let you know.

JACKIE: All right. Great. Thank you so much.

Ms. WESTON: You're welcome, Jackie.

NEARY: All right. Thanks for your call, Jackie.

JACKIE: All right.

NEARY: All right. And I think we got a call from Crash - is that the right name? - in Chicago, Illinois.

CRASH (Caller): Yes, hello.

NEARY: Hi, Crash.

NEARY: Go ahead quickly. We just have a short time left.

CRASH: I'm curious as to what steps, like, an underserved minority, like, people who live in a certain neighborhood, or people who're part of a profession that doesn't get a lot of representation, could do to start their own credit union. And I'll take the guest's comments off the air.

NEARY: All right. Thank you so much.

Ms. WESTON: Again, I'd go straight to the ncua.gov site and see what they talk about there, because they have some information about starting a credit union, getting going. If you're underrepresented, that's a pretty good reason to get it going.

NEARY: All right. Well, thanks so much for joining us today, Liz.

Ms. WESTON: Any time, Lynn. Thank you.

NEARY: Liz Pulliam Weston is a personal finance columnist and the author of "Deal with Your Debt: The Right Way to Manage your Debt and Pay Off What You Owe." She joined us from NPR West. Tomorrow, Ken Rudin, our Political Junkie, will be live at the Newseum, and we'll be talking with Libertarian Party candidate, Bob Barr. This is Talk of the Nation from NPR News. I'm Lynn Neary in Washington.

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