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For the FDIC and customers, Fridays are the best day to take over failed banks

By Sara Lepro and Martin Crutsinger
Associated Press / August 15, 2009

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Q. It seems that every Saturday, when I open up the newspaper, I see an article saying that some banks had failed on Friday night. Why is it almost always Fridays when banks go bust? And when the FDIC takes over a failed bank, what does it do to make sure the bank will open on Monday?

Daniel Lippman
Washington

A. Most banks are closed or have limited hours on the weekend, so banks are typically shut down on a Friday to limit disruption for customers. The Federal Deposit Insurance Corp. is in charge of the failed bank’s assets, and usually has a buyer in place prior to the bank being shut down.

Over the weekend, the FDIC works with the employees of the failed bank to secure its assets and merge the bank with the acquiring institution.

One of the FDIC’s initial tasks is shutting down the website and putting up a temporary site to inform customers about the failure. The FDIC and the acquiring bank also need to get up to speed with major loans that are scheduled to close, foreclosures, and legal proceedings.

Customers still have access to their money through ATMs, checks, and credit cards, but the branches are usually closed until Monday.

Occasionally, a bank might be too unstable for regulators to wait until the weekend to shut it down, but those instances have been rare, said David Barr, an FDIC spokesman. Washington Mutual Inc. - the largest bank ever to fail - was seized on a Thursday last September as the bank crumbled under the weight of its bad bets on the mortgage market.

Q. How exactly is the national savings rate calculated, and what does it include and exclude? We keep hearing about the decline in the savings rate from around 10 percent in the 1980s to almost zero. But I read that the savings rate does not include the amounts people save in their 401(k) and similar retirement plans.

Michele Hymel
Albuquerque, N.M.

A. The personal savings rate that the Commerce Department calculates each month is derived from data it collects on people’s incomes and spending. The calculation is done on what’s called a cash flow basis. The government totals up all that people spend in a month and then subtracts that figure from people’s disposable income - what they earned minus what they spent on taxes.

The result of this calculation, expressed as a percentage of disposable income, is known as the personal savings rate. It does include the amount people put away for such things as 401(k) plans and other savings accounts - any money that an individual doesn’t spend in a given month is counted as saved. (Matching funds from employers are also included.)

The Commerce Department recently released revised data on the savings rate that shows it has been climbing since the spring of 2008. From a low of 0.8 percent in April 2008, the savings rate rose to 6.2 percent of disposable income in May - the highest in 14 years.