Ironically, banks aren’t the best place to put your money right now. There are many places that are much safer than FDIC-insured banks!

“It’s okay that the people of the country don’t understand our banking system and monetary system. If they did, I believe there would be a revolution before tomorrow morning.”

Henry Ford

It’s as if money is in the bank! What could be more secure or reliable than a long-standing financial institution?

1. The IRS and Civil Asset Forfeiture

What have Maryland’s dairy farmers, Long Island snack-and cigarette distributors, Virginia Army sergeants saving for their children’s college and the 67-year-old owner of a Mexican restaurant located in Iowa got in common?

All of them had their bank accounts taken by the I.R.S. They were all seized by the I.R.S. without any evidence or formal accusation of tax evasion, money laundering or other criminal activity.

Carol Hinders, a hardworking grandmother and restaurateur from Iowa, had almost $33,000 taken out of her bank account – her entire savings – due to her suspicious deposit pattern from her cash-only Mexican restaurant. 

Army Sergeant. Jeff Cortazzo, Arlington, Virginia, discovered that his daughter’s college funds had vanished for the same reason.

The IRS offers to pay back a portion of the seized funds in most cases. This process “looks a lot like extortion,” according to the Institute for Justice.

Cortazzo decided to settle, realizing that letting thieves keep a part of the loot was the fastest and most cost-effective way to get anything back. 

His daughter stayed home with him for the first year while he waited to go to college. Ironically, the sergeant started saving money in shoeboxes instead of his FDIC insured savings account.

A cash-only Mexican restaurant run by a single woman refused to negotiate and rejected all settlements. She eventually got her money back after a long fight. However, victory was bittersweet. 

Now, she is seeking restitution for legal fees that were more than twice the amount of the cash confiscated. In the midst of all the fighting, she decided that she would close the 38-year-old business, which means she is now permanently out of business.

Carol Hinders and Sergeant Cortazzo were never charged with any crime.

2. FDIC Insurance and the Illusion of Protection

When looking into the best place to put your money right now, a few people started to worry about their bank savings after 2008’s freefall in stock and house values. FDIC insurance covers bank accounts and was quick to provide additional assurances. FDIC insurance limits for savings accounts were raised from $100k up to $250k.

Suze Orman was also hired to speak on public service announcements. Banking continued as usual, with the public breathing a bit easier.

The FDIC published a pamphlet in 2009 called “No Safer Place In the World for Your Money” that boasted that they could get $100 billion of credit directly from the US Treasury. This line of credit, according to federal law, can be extended to $500 billion.

It’s impressive when you consider the fact $5.37 trillion in deposits has been made to US banks. This amounts to about a two-cent guarantee for every dollar that is deposited unless the Treasury is raided. 

This is despite the fact that re-appropriating either the defense fund budget, or the social security trust funds would not be an option. Others have calculated that the reserves are less than 2% of deposits.

This is a common misconception regarding FDIC insurance and banking in general.

It implies that your money is “backed” by real-world assets. This is not true. Let’s look at Fractional Reserve Banking to see how it works.

Fractional banking refers to a system in which only a small portion of bank deposits is covered by cash-on-hand. Banks have a reserve requirement of only 3-10%. A bank can lend out between 10 and 33 times the amount of customers’ deposits. 

The bank can issue a credit card or loan based on the applicant’s creditworthiness. This allows the bank to create money out of thin air.

Dollars, which are literally “banknotes”, are not backed with gold, printed money or anything kept in a vault. This conceptual cash’s value is determined by its worth and any confidence society has in banks institutions and the government.

FDIC insurance would almost be useless in an economic crisis that saw banks close to their doors. Monopoly money would be more valuable than your cash, but not as much.

Suze Orman, spokesperson for the Oprah network, admitted to her own panic attack. Orman, in a candid interview with US News Money, said that she knew that it was possible for the United States to collapse by the time that Oprah taped the show. My credit had frozen. I was unsure if we would be able get money from our A.T.M.

Suze is well aware that people cannot spend money that doesn’t exist. This applies to credit cards and fractional reserve banking Ponzi schemes. Banks are betting like Bernie Madoff that they won’t have to pay too much back at once. Making this not the best place to put your money right now.

3. Banking Cyber-Thieves

The U.S. banks remain largely silent on cyber-attacks. It is unclear if they are still unaffected by cyber-attacks or if they don’t want customers to lose their money.

It is not difficult to see how huge bank losses were caused by cybercrime between 2013 and 2015. A cybergang called Carbanak, which is an international criminal group, hacked into the systems at around 100 financial institutions to steal between $500 million and 1 billion dollars.

One bank was able to lose $7.3 million because its ATMs were programmed with cash-spreading algorithms that would allow it to send cash at specific times. A separate company had $10 million stolen via its online platform. 

The criminals targeted the accounting systems and stole money from individual account holders rather than the banks. 

One scheme involved artificially inflating account balances (for example, from $1,000 to $10,000). The “extra” money was then transferred to cyber-thieves.

According to Kapersky Lab, their intended targets were in Russia first, then the United States, Germany and China. 

The attacks remain active and are described by Kapersky as an indication of “a new stage in the evolution of cybercriminal activity.”

This short video explains in greater detail the cyber-heists that have a net worth of billions.

The hackers are not only after the cash, but also personal information. Hackers accessed nearly 90 JP Morgan Chase servers in June 2014. According to NYTimes.com, the breach was not discovered until July. By that time, the thieves had “the highest levels administrative privilege for many of the bank’s computers servers”.

The bank claimed that the breach did not involve highly sensitive information, such as passwords and account numbers. Hackers did however obtain customer names, addresses and phone numbers as well as email addresses.

Even more concerning than the fact that 83,000,000 households were affected by JP Morgan Chase’s breach, is the fact NINE other financial institutions were also compromised. However, they remain anonymous. 

Best Place to Put Your Money Right Now

A good offense is better than bad defense. We recommend saving EVERYTHING ELSEWHERE.

Some Americans have tried to respond to fear-mongering by putting their money in First Bank of Sealy Posturepedic or Beautyrest Savings and Loan.

However, we believe that there are better ways to manage your cash. Burglars often check your mattresses, freezers and socks drawers for cash.

A credit union is a good option for cash emergencies. Credit unions are known for being safer than banks. Credit unions are less likely to use leverage and make riskier investments with depositors’ money than banks. 

In 2009, 98 of the 8200 banks went bankrupt, and only 11 of the 7846 credit unions were able to fail during the economic downturn.

Mutual insurance companies are a good option for long-term savings. 

Long-term cash growth and storage is possible with whole life insurance. Presidents, CEOs, business owners with high success rates, and corporations have all used whole life insurance policies. 

This insurance is still available to all, even though it was used by the Rockefellers to grow and store wealth.

Mutual insurance companies, also known as “Privatized banking”, are owned by policyholders and not shareholders. They cannot leverage savings like banks, and they do not engage in risky ventures like AIG. 

Whole life policies can earn higher internal rates of return than any certificate of deposit or bank savings account when they are held for a long time.

Your Wealth in Overdrive Advisor can help you learn more about cash value whole life. Phil Bodines quick video 10 Minute Lesson on Life Insurance is a great reference for information about how to use whole life insurance policies in your financial strategy.