The Most Important Warning You May Get

If you have cash in a bank DO NOT assume it is FDIC-insured. Understand that investment products are not FDIC-insured and that includes money market accounts. As well, do not assume your savings account is FIDC-insured. That's right. It turns out that some banks have intentionally mislabeled certain money market accounts as savings accounts when in fact these are investment products.

I recently learned this when going over account options with a rep at Wells Fargo (WFC). But of course I had to ask if the savings account was FDIC-insured - something most people don't bother to do because they assume (rightly) that they are. If you think money market accounts can't lose money you are very wrong. While only one has failed in the past, there have been a few that have lost value over the years. Understand that these accounts invest in short-term securities like commercial paper, T-bills, repos and other securities. And many even have some of that sub-prime junk in them.

Make Sure it's in Writing

By all means do not take the word of the bank rep. If your money market or "savings account" (that's really a money market fund) loses its value, the bank will say you should have read the paperwork. And most likely the rep will deny telling you it was insured or else won't remember. So before you sign on the dotted line, make sure you have something that specifically says your account is FDIC-insured in writing. You need to see something in writing that links your name and account number to FDIC insurance.

You see, the banks now create so many manuals and booklets that it's often extremely difficult if not impossible to determine whether you are FDIC-insured. That was certainly my case. I opened the Select Rate Savings Account. Nowhere in the 59-page "What You Need to Know About Your Account" Booklet could I find the account listed. In fact, I saw so many different types of accounts my head was spinning. The bank did not give me a booklet specifically for my account, but rather a booklet lumping in all of these accounts. It took an entire day and a lot of patience to read and understand all of the paperwork. I'm very knowledgeable about finance and investments. I can't imagine how others with less knowledge or education are able to understand much of what they are reading. It's certainly not a walk in the park.

Still, nowhere could I find my account in any of this paperwork. They create one huge booklet, along with over 100 pages of customer account agreements and addendums. I have to conclude that is standard protocol not only at Wells Fargo, but most other banks as well. I've seen it many times in the past but I didn't worry about it. But now you should all be concerned because the banks are in some deep trouble.

A Call for Real Disclosure

Banks use the excuse that regulators require all of the lengthy disclosures. I doubt regulators require things to be so confusing. And some disclosures are more important than others. I want to see a piece of paper written in large boldfaced print that my account is FDIC-insured. I have not found such a paper or anything else that ensures my account is FDIC-insured. In my opinion, things are handled this way to confuse and deceive customers. Imagine that. A bank trying to take advantage of customers. That just can't be!

I can guarantee you that at least 95% of people are not aware that money markets are not FDIC-insured. When a person enters a bank, they see these FDIC stickers posted all over the place. Therefore, it's natural to assume that when you park your money there, it's FDIC-insured. This is especially true with money market accounts since they are treated and thought of by most as checking accounts. You might ask yourself why banking regulators do not require banks to also post stickers reading "Money Markets are NOT FDIC insured" right next to every FDIC sticker.

What Did I Do?

I called the bank and demanded that I be sent in writing a letter stating that my account was FDIC-insured. When the rep told me it would take 3-5 business days, I told him no way. I want it overnighted. It was due to the poor design of the materials that I do not have anything that states my account is FDIC insured. Thus, the bank should step up and rectify the issue. These days, corporations try to tell you what they will do when they screw up rather than asking what they can do to rectify the matter. They give you the take it or leave it approach. Well people, when you are talking about massive bank failures on the way, waiting 5 business days for piece of mind is a risk I'm not interested in. There is no reward for such a risk.

So did the bank honor my reasonable request? After waiting for 30 minutes on the phone, the rep came back, quickly said hello and hung up, pretending he thought I wasn't on the line…a typical tactic used by these call center guys when they don't want to deal with delivering the news that will disappoint customers. Well Fargo, this was the first and last time I will deal with you. You have lost my business forever. The problem is I have already black-listed three other banks due to horrendous customer service (Bank of America (BAC), Regions Bank (RF), and Chase (CCF)). I'm running out of options.

As you might be aware, the banking industry is the poorest run industry in America today, but that is an entirely different issue which I will come back to another time. Consumers need to accept the fact that banks are deceitful, dishonest and down right evil. And you need to release yourself from their stronghold. If you do, you will end up with a lot more money.

Stock position: None.