Conference 7.286::dcu

    I left the money for my house in the DCU for a few days.  I think the
    issue is insurance coverage and not much else.  I don't think I would
    leave it there for very long, however.

    Re .0:
    
>   Today at lunch, I mentioned depositing the proceeds of the recent sale
>   of my house into my DCU account and was greeted by howls of "Well,
>   you've lost it for good now!".
>
>   Well, right up front, I'd like to say that I think the way the BoD and
>   president are stonewalling us is horrible.  PG has raised some issues
>   that I'd like answers to.  For that matter, the way the BoD and
>   president have been acting has convinced me that I want them out of
>   office ASAP and replaced with a new BoD that'll answer a straight
>   question and review loans.  I'll be there at the special meeting, and
>   I'll vote the SOBs out of office with the  best of them, just like
>   everyone else.

    Indeed!
    
>   On the other hand:
>
>   Is my money really that poorly off in DCU?
>
>   When the fees were announced, I thought of taking my money elsewhere,
>   but stopped when I realized that I couldn't figure out what a good
>   "elsewhere" is.  Sure, the BoD let Mangone and his cronies walk off with
>   $17 mil, but out of the total DCU assets, that just hurts a lot. 
>   Compare this to so many other financial institutions in the area who
>   are fatally wounded or financial zombies.
>
>   The fact is that while DCU has pulled a few boners, it's not about to
>   go under any day now.  I cannot make this statement for most other
>   banks in the area because I don't know what kind of shape they're in,
>   or they've already gone under.

    The DCU is insured by the NCUA, which is sounder than either the FDIC
    (which regulates commercial banks) or the FSLIC (which regulates
    savings and loan associations).  Even in spite of the $8-9 million that
    DCU stands to lose in the Mangone affair, the DCU is sound and savings
    up to $100K per member are safe.
    
>   I can understand pulling my money from DCU out of protest, but it would
>   be a bit ironic if I dumped it into a bank that went belly up a week
>   later.  Sure, the DCU board have done some shoddy things, but in the
>   grander scheme of things, how do they compare to the officers of other
>   banks in the area?

    The biggest part of the problem (even beyond allowing themselves to be
    "blindsided" by Richard Mangone and his cronies) is that the BoD is
    doing TOO MUCH emulation of the commercial banks in the area and have
    forgotten that this is a credit union.  They have forgotten that WE
    (the members) OWN the DCU and that THEY (the BoD) are supposed to
    represent OUR interests ahead of their own.
    
>   Now, I'm not attempting to excuse the behavior away just because its
>   the least of the evils, but if all we have is evils, then we can cut
>   our losses with the least evil one in the bunch.  Is that DCU?  Well, I
>   don't know, but it sure looks better than, say, five banks in the
>   state where I live.

>   Let's keep things in perspective:  DCU screwed up, and now they're
>   giving all appearance of a coverup.  But from what we've seen, they've
>   screwed up a lot less than a bunch of other places.  We don't have to
>   accept their screwups, but in bad times like these, it could be worse.
    
    The safety of funds deposited in the DCU is NOT and NEVER HAS BEEN at
    issue.  The special meeting and the rest of this turmoil surrounds a
    severe loss of confidence that the BoD has met/is meeting its fiduciary
    responsibilities as required by the Charter, Bylaws, and laws of the
    Commonwealth of Massachusetts (in which the DCU is incorporated). 
    I believe that enough counter-examples have been documented to justify
    removal of the current BoD.

    While there there's little chance that the credit union will go  under,
    there is no guarantee beyond the $ 100K.
    
    It would certainly be more prudent to keep any amounts below the $100K
    limit at the DCU or at an outside bank.  Even if you put money in a NH
    bank that goes under, you're coverd by FDIC.
    
    Gim
    

FWIW:

Although I did not make it clear in my basenote, it was clear in the
conversation that I related that the amount of the proceeds were well under
$100,000.  There was no issue of whether or not the money was insured,
because it was clearly under the "limit", even if you added in the amounts
in my RSVP and IRA accounts.

The point of the conversation, as I understood it, was that I should avoid
putting money in DCU because it was a bad risk.  Evidently, some feel that
putting it into an unknown bank is a lesser risk.  I can only assume they
feel this way because they don't know what sort of bad loans that outside
bank made.

While with a real bank, you only have the benefit of 20/20 hindsight, our
"ownership" of DCU is giving us a little foresight, albeit very small,
given the latest information policies.  So, I restate my original point: 
We know what DCU has done wrong.  What makes any of us think that an
outside bank would be any better - especially in the total lack of data on
that outside bank.  (Hint:  The banks in greatest risk generally end up
being the ones paying the highest interest, to attract depositors, to cover
the risky loans they made to cover the high interest rates they promised
their depositors, etc.  Perhaps we could see the low interest rates at DCU
as a blessing in disguise, even if it's d*mnedably hard to get it out of
the disguise.)

    Banks,
    
    Your money is safe.  When do you write the check for the airplane? :-)
    
    One thing to keep in mind.  The DCU BoD are acting like a wounded
    animal.  That means they are apt to be unpredictable.  My question to
    you is, Will you need quick access to this money?
    
    If so, remember their little fine print about being able defer ANY
    request for funds for up to 6 months.  If something were to start a run
    on the DCU, (no I'm not suggesting that there is any reason for such a
    run), they might decide to defer any requests for amounts over $x,
    where your balance might be in excess of $x.  They are effectively in a
    position to be able to jerk you around worse than the FAA.
    
    I have been on the receiving end of the Feds shutting down a financial
    institution.  In my case, the institution was NOT being sold.  It was
    being liquidated.  I had 2 choices:  Go to the financial institution in
    person sometime during the next 2 business days and get my money, or
    wait for a check in the mail in about a week.  I chose the later and
    things worked out just fine.
    
    Bob
    

A week or two ago, things reached such a pass that I decided there was a
greater likelyhood that the DCU would be shut down than there was that I
would be involved in an auto accident.  Both are highly unlikely events,
but I felt that, just as I take simple precautions to protect myself in
case of an auto accident, I should take some very simple (and hopefully 
temporary) precautions to protect myself regarding the DCU.  

What I did was to move the bulk of my checking account balances to my bank,
which I happen to know is *very* conservatively run.  They'll close down
Bank of Boston, Shawmut, and a dozen other banks before they close People's,
in my opinion.

Note that I haven't stopped doing business with the DCU -- I got an auto
loan from them recently (at 2% lower than People's rates), and I would 
probably apply through them for a mortgage loan if it weren't serviced by 
Bank of Boston or Shawmut.

Do I feel that I might actually *lose* money entrusted to the DCU?
No, the worst possibility I see is to lose the use of it for a time.
But I thought that was worth taking a simple precaution.  

	Enjoy,
	Larry

PS -- The same action serves as my way of objecting to the "information 
protection policy".  The sad thing about this sort of way of objecting
the board's policy is that it is so hard to undo if the board changes
its policy.  

We're doing the same thing as Larry in -1...pulling most of our funds out 
to other institutions while we ride out the DCU Storm.

Actually, distrbuting your wealth (me? wealth? ha ha ha ha...) is a fairly
sound practice in any cas, what with the number of financial institutions of
all types falling apart everywhere.


/chris

Same here.  I feel it's unlikely that money deposited with DCU would actually
be lost (assuming the amount to be under the $100K insurance limit).

But the chance that DCU, or regulators, might say "Sorry, you can't have your
money for 45 days" prompted me to to move money in such a way that DCU
couldn't cause me to be late with a mortgage payment.

    
    DCU is in no danger of going under at this point from the information
    we have been given.  Luckily (?), DCU's loss of millions of dollars was
    able to be absorbed by the reserves we have built up (and which now
    must be built up again).  Deposits are insured for $100K.  So if you
    have more, standard practice is to split it into multiple accounts.  At
    different banks probably is also a reasonable hedge.
    
    In this day and age where financial institutions seem to be going under 
    faster than you can read about them, it is very important that we be
    able to evaluate each institution.  At this point in time, DCU
    "Information Protection Policy" does not provide timely (if any) access
    to some of the information to make this judgement.  Until I know and
    can verify that our credit union is not engaged in any further
    speculative investments or unsound business practices, I have placed
    most of my funds in the most conservative and sound bank that I could
    find.  When DCU has a BoD that represents its members, believes in its 
    members and is honest enough to give them the facts and let them think
    and decide for themselves, I will bring the funds back.
    
    So bottom line is evaluate EVERY institution that you have money
    deposited in or invested in.  S&Ls, banks, insurance companies, etc.
    are going under.  Old rules don't apply.  You can't assume anything anymore.
    

Has anyone actually experienced a modern example of the "n-day notice" provision
actually being used?  It would seem to me to be completely unworkable in
this day and age.  I thought it was mostly a provision for S&Ls to protect
themselves from a run on their savings deposits (since by their nature, most
of the deposits were tied up in long-term residental real estate loans).
How can an institution with demand deposits (checking accounts) do that?
Would they bounce checks drawn on the account during the notice period?

Tim

    I think that part of the problem is that folks are satisfied that DCU
    is no worse than other institutions.  That is, money is at no worse
    risk, loans are at no worse rates, interest is at no worse rates and so
    forth.  The problem is that other institutions are at risk of going out
    of business.  DCU should be better than other institusions ... period.
    The time to fix it is when it can be fixed, and not wait for it to
    become worse than other institutions or shut down like other
    institutions.  I like how PK summed it up.  He figures that DCU has
    problems that he can do something about.  So, he's doing what he can.
    We see problems with the DCU that can be fixed.  Let's fix the
    problems.
    
    Steve

    
    Ditto.  I hope to never deposit my money in a financial institution
    becuase it "is no worse" than another.
    
    As for requiring notice to withdraw.  Given the ability of DCU's
    members to communicate, I could think of no single act that could do
    more towards generating a run on DCU.  I certainly hope it never comes
    to requiring notice for withdrawal.  If it does, we are in big trouble.

Well, I'm not happy that DCU is "no worse than another".  What concerns me is
if I decided to move my money elsewhere (which is something I think about a lot
lately), how do I know for sure that the place I pick is even better?  For that
matter, how do I even know that it's "no worse than DCU"?

How do I know that the place I move my money to won't also hit me with a 30-45
day delay, either by design or as a result of FDIC takeover?

    There's no way to guarantee that DCU or any other bank won't fold
    and one will lose access to one's money for a while.  Since the
    $100K limit is, at least for me, of theoretical interest only,
    I'm not worried about permanently losing money, assuming the feds
    keep the S & L insurance boat bailed out.
    It does seem to me to be within the relm of possibility that
    some sort of delay could, for one reason or another, be put on 
    access to one's money...either at DCU or at some other bank, 
    if that bank or credit union has problems.  Not particularly
    likely, but possible.  At this point I have no idea how the 
    DCU BoD flap is going to play out.  Going on the "not all the 
    eggs in one basket" theory, I've recently spread my savings 
    around.  I can ride out any reasonable fund access delay at one
    bank without any real problem.  I can pay the property taxes,
    etc. if need be, from the other bank.
    Even without the DCU BoD flap, I might have done the same thing.
    My current displeasure with the attitude of the BoD has merely
    added another reason to the list of why I think it's a good idea.
    If the BoD keeps posturing and maneuvering and content-free
    communicating, I'll spread my savings some more. 

   .0>>> Today at lunch, I mentioned depositing the proceeds of the recent
    sale of my house into my DCU account and was greeted by howls of "Well,
    you've lost it for good now!".
    
    One thing that is being overlooked in the heat of the moment is that,
    under normal circumstances, you have 18 months to "re-invest" those
    proceeds into a primary residence of equal or greater value or risk
    paying capital gains tax on any "profits"... then it WOULD be lost or
    good.
    
    Disclaimers:
    (1) IRS Code is too complex to summarize in a few lines.  Consult a
    qualified practitioner or other tax professional for further
    information and/or advice.
    (2) The details of your personal finances are just that --- personal.
    Whether or not you "made money" on the sale is your business...
    \Gary

.15:

Oh, don't worry about that.

First off, it wouldn't be "lost" to capital gains.  At worst, 33% of it would
be lost.

Second, a very small part of the proceeds were profits on the house.  Most of
the proceeds were simply what we'd already paid against the purchase price (a 
combination of original downpayment and principal paid against the (15 year)
mortgage).  Of the difference between our original buying and the ending 
selling price, most of the "profit" gets soaked up in improvements to the house
just prior to the sale, and realtor's fees.

But, that's off the subject.

    Re: .16
    
    > Oh, don't worry about that.
    
    Trust me, I'm not worried.  It's YOUR money.
    
    > First off, it wouldn't be "lost" to capital gains.  At worst, 33% of
    > it would be lost.
    
    First off, everyone knows that.  Second off, next time you know you
    won't be missing 33% of your money, let me know, will ya'?  Most of us
    are sensitive to interest rate movements and investment yields that are
    far more subtle than that.  I can't rationalize any willingness to part
    with 33 PERCENT of someone's money!!!

    > Second, a very small part of the proceeds were profits on the house. 
    
    Once again, I think anyone remotely familiar with real estate
    transactions would have figured that; there was really no need for you
    to have commented on the obvious.
    
    Under our economic system, people spend their entire waking hours
    trying to maximize "profit", which you appear to be willing to part
    with 33% of... there are people out there who are not as well versed in
    these matters and my note .15 was aimed at them as well.

    > But, that's off the subject.
    
    This is off the subject, too, but you have illustrated one of the risks
    of answering requests for data/advice in notes files, that is, that the
    base note author or another noter will pick apart perfectly sound
    advice because it doesn't exactly apply to their case... in this case,
    I went so far as to predict that my comments might not strictly apply
    in your case, and yet you felt compelled to differ with me as, if you
    were proving some point.
    \Gary

    The IRS time limit is 2 years, not 18 months, with a host of other ifs,
    ands, and buts, like are you older than 55?

    
    Geee, getting back to the original, original question....
    
    There are no guarantees about your money not being held or banks
    suddenly going under.  You can only make the best decision possible
    based on the facts you can and are willing to acquire.  Usually, when
    banks hold your money, the place has already been grabbed and it's too
    late.  You can get independent evaluations of banks, etc. that are done
    by other companies.  Unfortunately, these are frequently based on
    numbers that are given by the institution which is in trouble.  In some
    cases, these places go from being rated #1 to being insolvent, almost
    over night.
    
    This is why it is of primary importance to know the investment and
    managing philosophy of an institution.  Find one where conservative
    means conservative.  People's Bank is one that comes to mind.  They
    have followed the "old-fashioned" banking ways and are rock solid in
    the worse of times (now).  

.17:

I'm not sure what's happened here.  If it's so obvious that I'm going to
make little or no profit off this house, why  did you feel it necessary
to tell me that I'd have to pay taxes on the nonexistant profits in the first
place? 

I can easily rationalize paying 33% taxes on nothing (or near to it) under the 
heading of cutting my losses and getting into a better investment.  Since I 
don't spend every waking moment worrying about these things, I can trade that 
money (33% of 0) for time not spent worrying about it (or buying new furnaces).
Having been continually raped by the real estate markets around this country 
(and not the government - yet), it's a simple choice between getting raped 
some more, or paying the dues and getting out.  I would have thought this to 
be obvious, but perhaps it isn't.

I sincerely mean no offense by this, but I see it as no worse to pay taxes
on the profit than I would see spending still more money on a house that I
don't like.  Unfortunately, people don't question throwing good money after 
bad in a house, but they do question getting out of it.  Which is worse:
hanging around for the honor of spending another $4,000 in repairs, or paying
33% tax on $2000?

Look, you gave me some friendly advice, and I tried to say "thank you, but
I understand that already, and it's not an issue for the following reasons".
This wasn't a personal attack from me to you.  I was simply explaining that so
that you'd understand that I understood so you didn't have to explain to me
further.  I was trying to be friendly and appreciative, but I understand what
those efforts are worth now.  I didn't feel attacked or insulted by your reply
.15, nor did I intend to attack or insult you with my reply .16.

I'm sorry if you took what I said to be a pesonal attack, because it certainly
wasn't intended as one.  I wasn't differing with you.  I thought I was assuring
you that it wasn't an issue.  I thought that if you cared enough to give me
that friendly advice, you'd also care enough to hear that it was not a concern
for me.  It was not a case of me picking your note apart.

    Let's chalk the whole thing up to it being Monday.

    re:  .21
    
    Wisdom.
    
    \Gary

    re .0 & others
    
    Lets not forget the lesson learned in Rhode Island.  The health of the
    DCU may not be the only factor involved in a temporary shutdown.
    
    {The governor closed all Credits Unions insured by that states
    equivelant of NCUA because the insurance fund was insolvent.  The
    closure was not directly related to the health of the individual Credit
    Unions.  Nonetheless, depositors found even the insured portion of
    their deposits frozen for a period of time, and all deposits over the
    insured max may be lost.}  I may have some of this wrong, but the
    basics are true.
    
    Also, a question - if the BoD is removed, would/could that prompt the
    NCUA to freeze funds until a new BoD was voted in.  Bummer, we're
    building a house and need fluid funds.
    

re .23:

The NCUA and the RI credit union insurance funds are two different animals.
It would take *lots* of credit union failures to bankrupt the NCUA, and even
in that case, the precedent of the S&L fiasco would point to a federal bailout.

    
    Before we get too far down this track, it should be said that DCU's
    existence is not threatened by the millions in loan losses.  They are
    not as well off as they were, but they aren't fatally wounded.

I wouldn't worry about a potential seizure of any FDIC, FSLIC or FCUA
institution.  Generally they are back open for business the next day, or if
permanently closed, your funds are distributed relatively quickly.  If the
total of all your deposits at an institution greater than 100K, I'd at least
check to make sure that you'll be covered if the money is in separate accounts.
One gotcha that has caught some people -- they had a 100K CD, and thought they
were fine, but lost the interest since the total of principal + interest was
greater than 100K.

As PG said, the DCU is relatively healthy -- just not as healthy as it was
before the participation loans.

Tim

    In Massachusetts, banks have the "right of offset".  That means they
    can take whatever money you have in one account to pay off what is owed
    in another.
    
    I wonder if the customer can do that with his own accounts as well.

re: .28

Yep.  That's one reason why I don't keep all/most of my money in one place.
A lot of credit card agreements are that way too.  If you were late on a
credit card payment, the bank could declare the whole amount due, and clean
out your savings account to pay for it.

Bob

    The B.C. cartoon in the newspaper yesterday was
    
    Adivice:
    
    "Never put your money in a bank where all the cameras are watching the
    bank president."

    
    My friend gave this one to me!  It couldn't have been more timely...
    

Well, after reading the latest response from MM on requests for information
(posted elsewhere in this conference, discussed in great length), I think I have
an answer to the question I asked in the title of this note.

It's the latter.