The economic news continues to get worse and worse.  First, here is a brief summary of some of the advice I offered in last month’s Estate Planning Insights.  Make sure that your savings accounts, checking accounts and certificates of deposit are in FDIC insured banks or NCUA insured credit unions.  Keep the amount of money at each bank or credit union within the insured limits of $250,000 up through December 31, 2009 and $100,000 thereafter.  Money market funds are not insured by FDIC and could lose their value.

The FDIC says that no one with money in an account within the insured limit has ever lost money since FDIC began.  The FDIC website also says that an insured account is protected by the full faith and credit of the United States.  However, that statement is not backed up by the law.  A 1987 opinion by the FDIC’s own counsel states that Congress has a moral obligation to back up FDIC insurance, but that the law does not require the United States to back up the FDIC.  Therefore, if many banks fail, it is possible that FDIC insurance will not be able to protect all accounts.

The safest interest bearing investment in the U.S. today is probably Treasury bills.  These investments are backed by the full faith and credit of the U.S. government.  There are a few money market funds which invest only in short-term U.S. Treasury securities.  The yield on U.S. Treasury bills is so low now that these funds are having difficulty collecting a management fee and still paying interest to investors.  Therefore, unfortunately, Vanguard, Fidelity, and others financial institutions have recently closed these safe money market funds to new investors.  You can buy treasury bills yourself at http://www.treasurydirect.gov/indiv/research/indepth/tbills/res_tbill_buy.htm.  It’s more work than investing in a money market fund, but the yield is a little higher, and it is the safest investment around.

If you prefer staying with a local bank, and if you want to be safer than just relying on FDIC insurance, then you should check the financial strength of your bank.  I like to use a free on-line rating system.  It gives each bank a grade similar to a report card grade, such as A, B, C, D, or E.  First Hawaiian Bank is rated as the strongest bank in Hawaii, with a grade of A-.  If you want to see how your bank is rated, go to www.thestreet.com.  When you get to the homepage, click on Portfolio & Tools.  Then, from the pull-down menu, click on Banks and Thrifts Screener.  You will see Find a Bank on the left hand side of the page.  Where it says Company Type, enter “Banks.”  Where it says State, enter “Hawaii.”  Then click on Search.  You will see the banks in Hawaii with a grade for each.  If your bank is not listed, where it says Company Type, enter “Savings and Loan.”  Then click on Search.

If your bank has a low rating, you will have to decide whether to pull out your money and make the bank even weaker, or to stay put and rely on FDIC insurance in case the bank fails.

You can also use this same rating system to check on the financial strength of your insurance companies.  From the Portfolio & Tools pull down menu, click on Insurers and HMOs.  Enter the name of the insurance company and the state where it is located.  If you have an annuity with a very weak insurance company, you may want to consider taking your money out and putting it somewhere safe, even if you have to suffer penalties and taxes.

The credit union system is also experiencing problems because of investments in mortgage backed securities.  On January 29, 2009, it was announced that the federal government is doing a credit union “bailout” of $1 billion.  The Safe and Sound Ratings at http://www.bankrate.com/brm/safesound/ss_home.asp rates not only banks, but also credit unions.  Check the safety of your credit union, too.