First time home-buyer tax credit extension bill passage on November 3rd. Let’s hope.

If Senate Majority Leader Harry Reid’s (D) prediction last week is correct we will have a new bill tomorrow or by this week.  It will extend the tax credit to April 30, 2010.  The original bill expires at the end of November 2009.   In February 2009 the $8000 first-time home buyer credit for married couples (individuals $4000) was put into law in an effort to provide the economy with an economic stimulus.  The extension if approved will allow, more Americans to qualify for the tax credit including those with higher incomes and even those who currently own homes.

A credit of $6500 is provided, if you are a homebuyer and lived in your previous residence for five years.  Additionally, for high income earners, individuals earning up to $125,000 annually and couples earning up to $225,000 annually now qualify.  The limits under the present bill are $75,000 and $150,000 respectively.

In case the bill is not passed, then you would need to purchase your home by the end of November.  Regardless of whether there is an extension, the bill has no provision for vacation or rental properties.  This is strictly for your primary residence.

If you are feeling confident about the future and can afford to buy a house at these historically low prices join the more than one million people who have claimed their share of the tax credit.

2009 RMD Waiver Relieves Retirees in a Down Market.

George Bush enacted the RMD waiver into law in December 2008 under the Retiree and Employer Recovery Act when the financial crisis was at its peak and stock portfolios held in IRAs and other tax deferred retirement accounts were at its lowest values. An RMD or required minimum distribution is the amount an account holder must withdraw in order to pay taxes.  Of course one may withdraw more in order to meet living expenses and medical bills and other such necessities or luxuries.

This requirement begins in April of the year one turns 70 ½.  The money must be withdrawn by December 31.  If the RMD is not withdrawn, then a 50% penalty is imposed on the amount that was not withdrawn.    The RMD is basically how the government ensures that it receives taxes on your retirements accounts that were allowed to accumulate and gain value tax free.  It’s a revenue stream that helps pay for all the wonderful services we receive as U.S. citizens.  The RMD only applies to IRAs and employer sponsored retirement plans such as 401k and 403b plans.  If you own a Roth IRA, you do not have to worry as the money used to fund this type of account has already been taxed and therefore exempted from this requirement and obviously waiver.

The IRS determines your required minimum distribution based on your life expectancy and the balance in your retirement account.  Your accountant can tell you what your RMD should be.  You can also find your RMD at IRS.gov.  Many financial and retirement related websites also have retirement calculators for RMD.  Just Google RMD calculator.  Retirees have benefitted from the 2009 RMD waiver because it allows them to recover some or hopefully all of the losses endured in 2008.  Absent a waiver, a retiree would have had to make a withdrawal on a lower account balance and force to take losses.  Instead with the waiver, one will likely have a lower taxable income while enjoying the potential of having account values (including the RMD not withdrawn) grow once again with the thriving stock market.  As a result, some may benefit by not having to pay taxes on social security income as well.

Don’t expect the waiver to be extended to 2010.  The growing sentiment that the U.S. economy is out of danger and the 50%+ advance in the stock market has the administration and the IRS preferring to get its portion of taxes from retirement accounts.  That said the resumption of 2010 RMD will be based on account balances as of December 31, 2009.  If you turned 70 ½ this year you would have had the privilege and responsibility of taking your first distribution if there was not a waiver.  Make certain for 2010 you do it (your RMD) by December 31, 2010.  If you already took a distribution this year, you have the option of putting that money back into your IRA as long as you do it by November 30, 2009.  Please discuss this matter with a tax or financial planner to ensure compliance with IRS requirements.

Anatomy of a Bank Takeover – This American Life & All Things Considered

Usually when you read about yet another FDIC bank takeover, the absence of emotion, the impact on the lives of bank employees, and the on the ground view of what happens on that fateful Friday is almost never portrayed as it is in Episode 377: Scenes from a Recession where a compellling audio story of the Bank of Clark County, Vancouver, WA is told. After all, who cares.  As long as my money is insured by the FDIC, I’m good!

In this episode, the story of a Circuit City store closing is also told.  This post will direct you to the All Things Considered resource.  The story was written by Chana Joffe-Walt.  The audio can be found here.  The abridged article transcript is here. I hope you get to listen to it.  It may not be completely objective or able to tell the entire story.  It is only 12 minutes.  But, you will see some criticisms of the piece from comments posted by readers on the article’s web site.

Anatomy of a Bank Takeover

by Chana Joffe-Walt

On a mid-January night, some 80 agents of the Federal Deposit Insurance Corp. pull into Vancouver, Wash. Their rental cars are generic, their arrival times staggered. One by one, agents check into a hotel, each quietly offering a pseudonym to the guy at the desk.

They’re here to take over the Bank of Clark County, which the FDIC has decided is insolvent. It’s the agency’s job to insure American bank deposits and to step in when a bank fails. The FDIC tries to keep the planning for its operations top secret, to avoid sparking a panicked run on the bank.

At 9 o’clock on this particular Thursday night, FDIC agents call another bank nearby, Umpqua Bank. They tell executives there that Umpqua has been selected to take over the Bank of Clark County. They order them not to tell anyone. Come to a meeting tomorrow at noon, they say, and we’ll fill you in on everything you need to know.

The next day, Ric Carey, an Umpqua vice president, heads into that meeting. “The FDIC had taken a location approximately two miles from the main office of the bank in a hotel under a different name,” he says later. “And they’ve been through quite a few of these. I think one of the gentlemen leading the discussion said, ‘You know, I’ve done over 200 of these over my 25 years, and let me tell you how it’s going to work.’ ”

He agrees it almost feels like a spy movie. “They’ve done this before — quite a production,” he says.

Breaking The News

Todd Zalk is what you’d call a team player, a total bank loyalist to the end and beyond.

Zalk works at the Bank of Clark County — “the best community business bank,” he says, “because we’ve changed the game in business banking and we were winning.” He laughs at himself, but a month after the failure he’s still wearing his Bank of Clark County nametag, still passing out his bank business cards with a warm handshake and calling people by name whenever possible.

Zalk says he had no idea the FDIC was in town and his bank was about to fail. On Friday afternoon, failure day, he was bringing in new business. “I had people that wanted to open accounts,” he says, adding that he opened more than 55 new accounts in the fourth quarter.

He knew the bank was going through a rough time — everyone knew that. The CEO had been saying that the bank was like a ship. The bank had taken on some water in the recent storm and might need a bigger ship, meaning a larger bank, to take it on. But things were basically under control.

On that Friday afternoon, Zalk is out meeting with potential clients.

At 5:01 p.m., a small team enters the Bank of Clark County. They’re a casual group, just two FDIC agents and a Washington state regulator, and they head straight for the CEO’s office. And this is when it happens: They deliver the news. They tell him his bank is undercapitalized and has failed.

At 5:03 p.m., an agent positioned by the CEO’s office door, types the news into a BlackBerry. It is received by everyone on the FDIC takeover team, including the FDIC’s manager on location, Ron Hodges.

“At 5:04, we receive the notification that the bank had been declared failed,” Hodges says. “It’s that simple.”

A minute later, FDIC agents begin closing in on the bank. A few are already inside, quietly and discreetly securing the cash and the vaults.

Carey, with Umpqua Bank, has assumed a position down the street. He’s sitting in his car, waiting and watching.

Gone In A Flash

Zalk, oblivious to all this, heads back into the office after a long day of work. And it’s weird, he says, how tense everyone seems. A teller mentions that there’s a staff meeting at 6 p.m.

“By this time it was quarter to 6, and I went up to someone who was senior vice president at the bank and I said, ‘How are you doing?’” Zalk says. “And they said, ‘Oh I’m doing all right.’ I could tell something was going on and they didn’t want to say. We looked across to the other side of the bank and there were two employees adjusting pictures on the wall. And he kind of laughed and said, ‘Wow, that reminds me of adjusting the chairs on the Titanic before it sank.’ And that really told me something was going down.”

The Bank of Clark County staff gathered in the lobby at 6 p.m. The group included a couple of people in suits whom none of the bank staff recognized.

“Mike Worthy, our CEO, came out,” Zalk says. “It was very short. He stood up and said, ‘Well, I’ve used the analogy that we were a ship that was taking on some water and we needed to pull up next to a bigger ship, and we thought we had a few buyers for that. And now the biggest ship that sails the seas has come alongside us, and they are going to be taking us over — and that is essentially the federal government.”

At 6:03 p.m., down the street in his car, Carey notices his BlackBerry vibrate. He was getting the signal, an e-mail: “It’s time. Come in.”

Two minutes later, Carey gets out of the car and starts walking toward the bank. Meanwhile, in the lobby, a woman from the FDIC takes the stage.

“She said within the next 10 minutes there will be 80 FDIC employees coming into the bank. And I looked out there, and it was dark so I couldn’t really see,” Zalk says. “Then all these people, mostly in suits and professional clothing with attorney-type briefcases, start entering the bank, just flooding into the bank. I was so awestruck at them coming in — and so many of them coming into the bank, that I turned around and looked over there, and just kept watching them, and they just continued to come. I mean 80? I mean, our bank had, like, 100 employees.”

Out in the parking lot, he noticed a flash. It was a photographer for the local newspaper taking a photo for the front page of Saturday’s edition.

Keeping The Doors Open

At 6:08 p.m., Carey enters the bank he will own in just a few days. He finds the staff members are standing in their closed bank headquarters trying to digest the news. Some of them are crying. He remembers one of them saying, “My goodness, I just told one of our biggest customers yesterday, ‘Don’t worry, everything’s fine.’”

He says they seemed almost personally embarrassed that they now had to face those customers.

It’s now around 6:10. The Clark County people have a bunch of questions running through their heads — first among them: Do we get to keep our jobs? Carey can’t answer that. Umpqua will need only about a third of the Bank of Clark County staff. But it’s too soon to let individuals know whether they just lost a job.

The Bank of Clark County no longer exists. It’s not quite Umpqua Bank yet. The FDIC is in charge. The bank has to open its doors Tuesday morning — Monday is Martin Luther King Jr. Day.

The FDIC agents announce that, through the weekend, the staffers will be temporary employees of the FDIC. Stay and help us, the agents say.

“Most of us were planning on leaving at the end of the day,” says Ken Moody, the bank’s vice president of information systems. “My daughter had a seventh birthday that we were going to go to.”

Like An Autopsy

At 6:20 p.m., the FDIC agents spread out into offices, storage rooms, hallways, into any space available. They tape handmade signs to the doors, labeling rooms with functions like “audit,” “security” and “investigations.”

The agents begin going through files. They change the Web site and count all the cash by hand, a task that takes three hours. They check the safe deposit boxes, go through desk drawers and toss out bank letterhead.

From all the paperwork and computer hard drives, the FDIC has to reconstruct the bank’s entire balance sheet. It has to know what it’s selling to Umpqua.

The agents’ work includes checking every single account. Ones with a balance under $250,000 are fully insured by the FDIC. But some people have more than that, and there are business accounts and loans and it gets complicated. Some of the accounts are covered, some aren’t.

While the agents are sorting all this out, they can’t have customers going online and moving money around. They need to shut down the bank’s computers for a short while, maybe an hour. “Things started happening very quickly and with what seemed to be a lot of precision,” Moody says.

At 6:25 p.m., Moody sees three agents approaching. They hand him a thumb drive and ask him to plug it into a computer. The drive contains all the instructions about all the computer systems.

“It was like watching an autopsy being performed by a really skillful surgeon,” he says. “They just came in and sliced and diced and broke the bank up into a bunch of different pieces, threw them into different buckets — and did it with great efficiency.”

It was like an autopsy, he says, of all the work the bank employees had done together for a decade.

‘They Were Really Nice’

Many workers at the Bank of Clark County said one thing about the FDIC that you don’t often hear about a government agency — that it did a really good job. They describe the agents as kind, courteous and efficient. Everything was structured, even how and when to grieve.

“Many of the people who came in from the FDIC got to where they were because they were part of a bank that was failed,” says Lisa Stapleton, an assistant loan officer. “And they were like, ‘You know what? We’ve been where you are. And we understand and it’s going to be fine.’ So they were really nice. Having that empathy helped it kind of make it a little more pleasant.”

The Bank of Clark County had 100 employees and assets of $446 million — it was a really small bank. But the federal takeover kept 80 FDIC agents, about 50 Bank of Clark County staff, and 100 Umpqua employees, working round the clock for three days.

Most of the largest banks in trouble right now — Citibank, Bank of America — are about 6,000 times the size of the Bank of Clark County and much, much more complicated.

Considering the scale involved, it’s not surprising the U.S. Treasury secretary’s latest plan does everything it can to avoid using this process on those big banks. When you take over a little bank, it’s called receivership. When you do it to a big bank, people throw around the word nationalization.

But on the other hand, check these FDIC folks out. They know what they’re doing. And every week they get more experience. In the 10 weeks since the FDIC took over the Bank of Clark County, 18 more banks have failed. That brings us to a grand total of 20 since the start of this year — a number that will likely grow tomorrow.

FDIC Alert: Level One Bank Acquires Michigan Heritage Bank

Friday was a busy day for the FDIC.  On Friday, three other banks were taken over in addition to the one headlining this post.  The notices can be found on the following links:

• First Bank of Idaho – Ketchum, Idaho
• First Bank of Beverly Hills – Calabasas, CA
• American Southern Bank – Kennesaw, GA

Here is one of the most recent FDIC bank closures which was achieved by Level One acquiring Michigan Heritage Bank on Friday, April, 24. The article posted below is rom PRNewsWire via Comtex and appears on foxbusiness.com.

FARMINGTON HILLS, Mich., April 24, 2009 /PRNewswire via COMTEX/ —-Level One Bank of Farmington Hills is pleased to announce the acquisition of all deposit accounts and select consumer loans of Michigan Heritage Bank, also of Farmington Hills, from the FDIC as Receiver following its closure on April 24, 2009. Level One Bank was selected by the FDIC, after a competitive bidding process, to assume these deposits and purchase these selected assets.

All Michigan Heritage Bank offices will open for business as branches of Level One Bank beginning Monday morning, April 27, 2009. Michigan Heritage Bank depositors will automatically become customers of Level One Bank and will have uninterrupted access to their funds, all of which will continue to be insured by the FDIC to the FDIC’s limits with no loss of any depositor money.

Level One Bank is a locally owned, full-service commercial and consumer bank which strives to exceed customer expectations at every point of contact. Level One Bank continues to take banking to a higher level with the most qualified and enthusiastic bankers in the market and the technology and infrastructure to make banking easier and more convenient.

“As a bank committed to the success of our local community – both its residents and businesses – we are thrilled to welcome the Michigan Heritage Bank customers into the Level One family. We pride ourselves on making a difference for each of our customers by providing a superior level of attention, treating each family like a business, and each business like family. We truly believe the transition will be a smooth, enjoyable experience for all our new customers. And we believe by keeping these deposits local, we’ll continue to positively support our communities and state,” said Patrick J. Fehring, President and CEO of Level One Bank.

Level One Bank’s Consumer Division offers personal savings and checking accounts including free checking and competitive interest-bearing accounts such as Money Markets, IRAs, and CDs. The bank also provides a complete array of consumer loan products including first mortgages, home equity, personal lines, auto, recreational vehicles and credit card services. The Commercial Division provides a complete menu of products including lines of credit, term loans, commercial mortgages, SBA loans and a full suite of Treasury Management Services.

   Level One Bank locations will be:
   30201 Orchard Lake Road, Farmington Hills
   28300 Orchard Lake Road, Suite 200, Farmington Hills
   21211 Haggerty Road, Novi
   28345 Beck Road, Suite 102, Wixom

The official fdic.gov press release can be found here: PR09058.

Estate Planning: It’s For Young People, Too

I teach Estate Planning and Administration from an attorney/paralegal perspective at Shepherd Univerity to a classroom comprised mostly of seniors.  That is senior, young and getting ready graduate and start their journey to retirement and asset protection.  I think they are finally starting to get it as I take every opportunity to make the concepts applicable to them as well as their families.  I had a representative from Hospice of the Eastern Panhandle in Martinsburg, WV, emphasize, in the absense of assets, that living wills and advanced directives are useful, even for “invincible” young adults. It’s one of the easiest, and free things that they can do for themselves.