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Lodmell & Lodmell has traditionally been an asset protection law firm dedicated to helping individuals and families protect themselves from frivolous lawsuits and other legal risks.  That is still the main focus of the law firm, but in 2008 we were alerted to a number of other risks to assets.  Specifically, the failure of Bear Stearns followed shortly thereafter by the bankruptcy of Lehman Brothers alerted us to the idea of institutional risk to go along with market risk.

In particular, institutional risk is the risk that the bank (or other similar financial institution) where your cash is held fails.  But it goes beyond simply the risk of your financial institution failing.  That’s because all of the financial institutions in our country and, to some extent, globally are interconnected.  That means if one bank or brokerage house fails, the risk of contagion (and of imminent failure) to other financial institutions is very real.

The Reason for TARP

Remember the Troubled Asset Relief Program, affectionately called TARP?  The reason for the TARP bailout was simply to prevent to a series of defaults to prominent financial institutions.  The truth is that if the federal government had not provided a bailout, the U.S. likely would have suffered the loss of a number of major banking houses.  The reason is simple: Banks are largely interdependent.  They loan money to one another to meet reserve requirements imposed by the Federal Reserve.  In other words, when a bank’s capital falls below the mandated minimum, it must borrow money on a short-term basis in order to stay in compliance.

When one major banks fails, as happened in 2008 with the failure of Lehman, then other banks become skittish about lending to one another.  That’s because the short-term “reserve requirement” loans become extremely risky, and financial institutions stop throwing life rafts to one another.  TARP was an injection of liquidity meant to keep the system moving forward–meant to keep money flowing between financial institutions so that the system didn’t “freeze.”

Money Kept in Banks is Also Exposed to Risk

This means that with very few exceptions, even the money we keep in banks at cash is exposed to some measure of risk.  The central message of this article is simply to alert you to that risk.  We all take risk every day.  What’s important is that we be aware of the risks we’re taking, because it is the unknown risks that really catch us off guard.

If you’d like to discuss institutional risk and how you can reduce or eliminate it as an added asset protection strategy, call Lodmell & Lodmell today.  We will be more than happy to learn about your circumstances and make specific recommendations.

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Pashmina Lalchandani

CEO & Co-Founder, Bar & Cocoa / Owner, Flow Simple
December 9, 2010, Douglass was a client of Pashmina’s

I’ve known Doug in many contexts, as a friend, as a client and as a business partner and he impresses me on all levels. He’s dependable, smart, generous and I wouldn’t hesitate recommending him and his law firm to anyone.
He’s the best and most ethical lawyers providing asset protection with rock solid strategies to give you peace of mind about your wealth. Straight forward, and straight talk. Doug is exactly the lawyer I want on my side. If I send someone to Doug, I know they’ll thank me for it!

Social & Solar Entrepreneur, Pan Afrikan Theorist, Translator/Interpreter,
Founder & Visionary Leader @ Afrikanpride.
March 12, 2011, Marlon E. D. J. worked with Douglass but at different companies

Doug is one of the most powerful thinker i have came across. During the short time that i have known Doug he has been a great source of inspiration. He has a simplistic yet effective and accurate way to analyze anything you bring to his attention, and then by asking you key questions he gets you to see the light at the end of the tunnel. Besides being extremely bright, he is a genuine and caring individual which is why I feel fortunate to know him. I can say without a doubt that he his the person you would want to talk to if you were in need of a person with his expertise.
Most of the lawyers out there will probably meet your needs, but if you are looking for someone to exceed your expectations and give you that wow factor, look no more he is the person for the job.

Patricia Salter

Associate Dentist at Smileology
December 1, 2010, Patricia was a client of Douglass’

I have been a client of Douglas Lodmell’s since 2001. My main concern was asset protection in this litigious society. I can sleep alot better at night knowing I have the instruments in place to protect the fruits of my labor, and that they will not end up in the hands of a slick trial attorney.

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