No bank in the US, whether domestic or foreign-owned, is allowed to use the FDIC guarantee unless they have paid their insurance premiums to the FDIC. No exceptions! Not only the FDIC, but also other banks, enforce this. You'd better believe that any Internet bank claiming FDIC insurance but not actually having it, would get turned in ASAP by its competitors. "Hot money" (see the great article in today's WSJournal explaining how money flows around seeking the best rates of return, thus is nicknamed 'hot money') is a huge, huge source of cash to leverage for high-yield loans. Note that credit unions are not members of the FDIC. Some of them, but not all, belong to their own equivalent insurance organization. Be sure to check carefully. Having worked at a bank, I can tell you that the worst paid people are the ones who meet with retail customers. The higher you go, the less contact you have with non-institutional customers. No bank is really interested in you personally unless you are regularly moving around seven-figure cash flows. They can pretend they care, but honestly, they really don't. Little amounts are only worthwhile when lumped together into large conglomerated funds. It's just the nature of business.

SCAM ! ! ! This is CLASS ACTION LAWSUIT material. If you're pressed for time, just read the last paragraph . . . I moved money owed from other cards to the Discover card because I got a great interest rate ON THE MONEY I MOVED. If I use the card for ANYTHING else, the new charge goes on at a much higher rate and does not get paid down until the 'moved' money is completely paid off. I clearly recall getting the call from Discover and telling the agent that, no, I was not interested in this program. I got my "Welcome" letter today. (It would be incredibly stupid to put ANYTHING on this card.) The Discover Payment Protection Plan office is open M-F, 8-8. (Today is Saturday.) I called 800-DISCOVER and a nice agent (Dave) told me to call the Protection Plan office, and gave me their direct line - 877 883-1959. I told him they were closed; there was nothing more he could do. I asked for a Supervisor, spoke with Kathy, who assured me that: . 1. The charge would not show up on my statement. . 2. She would send my issue to corporate headquarters. . 3. She gets quite a few calls on this issue. . 4. THE CALLS THEIR SALES STAFF MAKES ARE RECORDED, AND THEY CAN TELL WHO TRIED TO CHEAT ME. (Yeah, like that's gonna happen. This is what happens when corporations 'police themselves.') Where are all the class-action attorneys when we need them? Since their phone message said the call may be recorded, I recorded it. I'll be recording any calls I get from Discover in the future. And when you get ANY offers from anyone like this, you'll find they often charge a rate "per month per $100 owed" -- do the math! If the rate is 99 cents per $100 (sounds pretty cheap, eh?), you just raised your annual interest rate by 12% ($1 is 1% of $100, times 12 months is 12% annually). In other words, it will cost you an extra $11.88 for every $100 you owe, every year. So, if your current rate is 13%, you just raised it to 24.88%! If you ask the salesman for your new rate, they won't tell you. They just stick with their "99 cents" routine.

Berniek is right: Much of the blame here falls upon the shoulders of the politicians (led by then-President Clinton), who forced banks to begin some rather foolish lending practices. Alan Greenspan certainly did his share to push this concept of "everyone can borrow" during his time as Fed chairman. Between creative financing, no money down offers, and other such options, the government has given people plenty of rope with which to hang themselves. We Americans haven't proven ourselves to be particularly strong in the moderation and self-discipline categories over the last 30-40 years. Also, remember the climate that existed in the 90s, when I bought my first house: Spurred on by the soaring housing prices, people were convinced that buying "as much house as you can afford" was a good move. Housing was considered an investment that couldn't fail. Yes, the experts began preaching about "the housing bubble" long before it hit, but the masses couldn't grasp how this sure-thing could ever fall. And there's always been a (faulty) basic belief that "If I couldn't afford it, the bank wouldn't lend it to me." I fully agree with those who say that Real Estate agents will push buyers to their upper limits and beyond, and banks will lend what they can -- it's all about profits for them. Yet, the home owner DOES also bear the brunt of personal responsibility. After all, who cares most about whether I can afford my mortgage -- and still buy groceries and other things I need? Clearly, it's ME! I reap the rewards or punishments of my decisions, so I should do the math and know whether I can comfortably afford a house (or anything else) before I buy it. However, we've sort of left that thinking behind in today's buy-now-pay-later society. We're constantly told that "we deserve" this or that thing. That if we're going to finance it, we deserve to have exactly what we want. That "everyone" has debt. We've got to get past that.

@ lana_roma There is a lot of yellow journalism out there. You can do your own research and there have been several peer reviewed publications on yellow journalism. We do know that the number of stories that predict economic decline increase in frequency as the time between economic declines increases. In other words, if we don't have a significant housing decline this year we can guarantee that there will be more stories next year about the impending housing decline. The phenomenon has to do with the psychology of what sells and doesn't, and very little to do with what is right and what isn't. If you find a journalist or blogger who doesn't write articles that predict some calamity, give him some money because he isn't getting paid to write. As to the above - This [real estate] market continues to be driven by the FHA issuing and guaranteeing risky mortgages written by thinly capitalized non-banks There is very little reason to attack the FHA for making risky loans. If anything the opposite is true and FHA loans are predatory. FHA loans are profitable because the MIP (interest rate premium of about .85%) far exceeds the low down payment risk. FHA loans are no more exposed than any other loan. In default the Mortgage insurance kicks in and makes up the shortage of down payment, and the cost of doing this is much less than what is charged to consumers. Our current policies create a questionable base for higher home prices when we consider the low end of the market is driven by Fannie, Freddie, and the FHA all insuring 3.5% down payments from borrowers that often have a weak credit history First - Demand creates the base for higher home prices, to think otherwise is naive. Access to cheaper cash does help increase house prices but not linearly. Cheaper money means that for the same payment (monthly cash outflow) you can get a better house. This often leads to more demand which leads to higher prices. But arguing this is bad is just silly, it is like saying - the price of steak is going up because now more people can afford steak and we didn't anticipate this many people being able to afford steak. Which is exactly his point... Second - Many countries have some institutions that encourage home ownership because home ownership is something we should encourage. While we have taken a financial look in this thread there are many non financial benefits to communities from home ownership. The above programs do exactly what they were meant to do, encourage home ownership.