Sheila Blair, Chairman of the FDIC, wants to let you know that a few banks will probably fail during the current credit crisis, but you shouldn’t worry about your money because its insured up to $100,000 for a regular bank account and $250,000 for a self-directed retirement account (IRA).
Q: What if banks fail in the credit crisis? Will customer money be safe?A: Banks are a safe place to put money, even if there are failures, because deposits are insured up to $100,000 and self-directed retirement accounts (IRAs) are insured up to $250,000. If you go to the FDIC website, there is a deposit insurance calculator on the site that people can use to make sure that their money is fully insured. The FDIC has a perfect track record on that score. I don’t make predictions, but based on the information we have more than 99% of all banks are well capitalized.
Q: How many small banks are in danger of failing?
A: There are 76 banks on the troubled-bank list, and most of those will be nursed back to health or be acquired by stronger institutions rather than fail. Plus, those 76 banks represent $22 billion in assets out of $13 trillion overall. That number could go up, but we would still be well within historical norms and far below the number we’ve seen in other troubled times. To put things in perspective, there were 1,500 banks on the troubled bank list in 1990.
She also offers some general banking advice:
Q: What are the most important questions to ask if you open a savings or checking account or CD?A: Assuming your deposit is less than $100,000 and you’re fully insured, you want to ask about the interest rate you’ll get on your account. You want to know about absolutely all fees, including transaction fees and minimum balance penalties. You also need to be very careful about overdraft protection. Some customers routinely use it as a source of credit when they are short on money, and this is an expensive option. If you pay a $35 overdraft charge because you just went over your limit by $20, you’ve paid a very high interest rate on your loan.
Overdraft protection as credit? Noooooo.
US regulator: Your bank deposits are safe [Fortune](Thanks, Matthew!)
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@shortergirl06:
Usually the latter – FDIC arranges to have solvent bank X take over the accounts of insolvent bank Y and writes X a check to make up the difference.
Hmmm.. I wonder who will win this round of “make the banks fail and buy them up”.
@JustAGuy2: You don’t know much and you’re just trying to obscure the issue. I’m not going to tell you where I keep it just to score points off you on the Internet. Just realize that whatever you say about someone holding gold for you (and yes, there are professional vaults that do this) goes double for the bank, who in fact does pool your money to use as its investment capital. Professional vaults rise and fall on their reputation. You retain title to the actual physical coins or bullion, unlike bank money, that is technically the bank’s until you request it back. And maybe not even then. If the bank decides you owe someone money, they do not have to go through any legal formalities to hold your money or give it directly to them. This is the way the law works right now.
@speedwell:
Well, whatever floats your boat. Just remember, if the point comes when that gold is really the only currency with “value,” the vault has physical possession, so you better have more friends and guns than they do if you want to get it back.
Personally, I prefer to have my investments appreciate over time rather than gather dust. Your mileage may vary.
i used to work at the FDIC and had to answer a lot of these questions every single day, often at great painful length. i’ll address 3 of the most commonly asked questions, which have conveniently been addressed here.
FYI, mac-phisto knows what he’s talking about.
i’d urge you to call 1.800.ASK.FDIC and ask them these questions. that’s what they’re there for.
@brennie: “Where can I find the list of ‘troubled’ banks? FDIC lists failed banks, but not ‘troubled’ on their website.’
* there is no such list.
@TMC1980 : “What they arn’t telling you is, the FDIC has 99 years to pay you the money.”
* this is a common exageration based on the fact that there is no defined timeline to pay back depositors. so by this technical definition, the FDIC has a million gazillion years to pay you back. but that’s not the case. historically, bank customers have received 100% of their insured deposits within a business week of the bank’s failure.
@johnva:@backbroken: “You can have more than $100,000 covered by the FDIC…just not in the same financial institution.”
* actually, the FDIC determines the amount of deposit insurance based on ownership categories. it is possible for someone to have more than $100K insured at a single institution (ex: 100K for deposits in single accounts [one owner], 100K per owner’s portions for deposits in joint accounts [more than one owner]). a man and a woman with 2 kids and a combination of single, joint and POD informal trusts could have up to $800K insured at a single institution. it all depends on how you set up & title your accounts.