initially wanted to blog abt salmi's bday today cos it was one of the best chilled chalets i've attended so far n the company was good. but in the end, i saw this news in yahoo which kinda made me wanna blog abt it even more.

well generally, the news is tt the government of LA has shut down indymac on friday which u can read the whole story on the link. again, it reflects the ever so popular diamond model of how a run on a FI which was still solvent could cause it to become insolvent.

from wat little i know, it seems tt the regulators has taken action so as to prevent it from deterioriating as compared to the case of the all familiar northern rock where the bank of england had to take out billions on loan and eventually nationalise it due to the massive debt. thus the 2nd largest FI insolvency in US history so far could b handled in a systematic way with proper procedures in place for the insurance claims and further payments of the secured creditors.

well obviously the bank, n all others who failed so far, had forgotten all the FI theories they learnt in school in a race to compete between earnings. everything from the selection to the limitation to the diversification to minimise credit risk had been ignored to drive up higher earnings.

n as i read the article with great interest, i wondered abt the reactions of the well-learned economists and finance experts. will it be like a bad debt which has been written off the face of the country's list and lay forgotten aft tt, mayb serve as a warning for awhile, or will it be like the heading of the article:"major crisis on the horizon"?

wateva the outcome, at least i noe tt if i were one of those depositors, i really dun have much to worry with the $100,000 deposit insurance per depositor as i dun predict i wld even have tt much money in the 1st place. but really, $32billion is definitely alot of money and sympathies to all those with all their pension n wat not with all these profit-driven instituitions.

talk abt diversification. it is definitely one thing every investor AND saver must know. if u had $200,000 and placed them in 2 separate accts, u'll never have to really worry abt 1st come 1st serve basis of such deposit contracts as they will most prob b protected by regulatory insurance.