page-loading-spinner
Home How Safe Is My FDIC-Insured Bank Account?

How Safe Is My FDIC-Insured Bank Account?

user profile picture Chris Martenson Apr 09, 2008
1
placeholder image
Wednesday, April 9, 2008

Your bank account may not be as safe as you think (or hope). Taking a deeper look at the legal details and the financial depth of the FDIC reveals several troubling details that call into question how the FDIC would fare during a true banking crisis.

The US is coming out of a period of unusually low banking stress and failures. Since it is typical human behavior to let one’s guard down during tranquil periods, we might legitimately ask if this has happened with respect to the FDIC.

Before we address that, we need to understand bit more about the FDIC.

What is the FDIC?

Let's begin with a snippet from Wikipedia on the FDIC:
 

The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. The vast number of bank failures in the Great Depression spurred the United States Congress into creating an institution which would guarantee deposits held by commercial banks, inspired by the Commonwealth of Massachusetts and its Depositors Insurance Fund (DIF). The FDIC provides deposit insurance which currently guarantees checking and savings deposits in member banks up to $100,000 per depositor.

Accounts at different banks are insured separately. One person could keep $100,000 in accounts at two separate banks and be insured for a total of $200,000. Also, accounts in different ownerships (such as beneficial ownership, trusts, and joint accounts) can be considered separately for the $100,000 insurance limit. The Federal Deposit Insurance Reform Act raised the amount of insurance for an Individual Retirement Account to $250,000.

The two most common methods employed by FDIC in cases of insolvency or illiquidity are the:

• Payoff Method, in which insured deposits are paid by the FDIC, which attempts to recover its payments by liquidating the receivership estate of the failed bank.

The rest is exclusive content for members

Curious about what being a member offers? Sign up now for a risk-free trial and get a sneak peek into the premium content, features, and perks awaiting you on the other side.

Community

Top Comment

At the end of the article, the Blue Ribbon like goes to an error page, and TheStreet.com link takes me to stock reports and I...
Anonymous Author by rafa
0
Image | GoldSilver.com

GoldSilver.com

Learn more
Image | ImmuneMist

ImmuneMist

Learn more