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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 09/20/2008 : 10:15:45
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What if your bank is seized?
Your accounts in any given bank are likely covered for up to $100,000, so you needn't worry about losing everything. But there's still plenty to do to keep your money safe.
IndexDiscuss in a Message BoardDigg This By Liz Pulliam Weston
Customers sweltered in long lines outside IndyMac Bank branches as word spread that regulators had shut down the once high-flying institution.
The scene -- folks fanning themselves in the July heat, some even bringing along beach chairs for the wait -- made great images for the media.
But the whole waiting-in-line thing was supremely pointless.
The vast majority of IndyMac depositors were fully insured and didn't lose a dime. Customers could still use ATMs, debit cards and checks to access their money over that weekend as the Federal Deposit Insurance Corp. sorted out the failed bank's business. By Monday, customers could resume all other transactions, including transferring their accounts to another bank if they wanted.
The fact is, we're out of practice when it comes to failing banks. Nearly two decades have passed since the savings and loan crisis took out more than 1,000 financial institutions at a cost to taxpayers of $125 billion.
Unfortunately, we're about to get a refresher course:
Eleven banks have failed so far this year, including IndyMac, the second-largest institution ever to fail.
The FDIC's list of "problem" institutions grew to 117 at the end of June (the latest total was released Aug. 28), compared to 90 at the end of March. The agency doesn't release the names of banks it worries about, fearing such disclosure will contribute to bank runs, but said assets held by the troubled banks swelled from $26 billion to $78 billion, including the $32 billion held at IndyMac.
Bank analysts predict dozens and perhaps hundreds more failures will come in the coming months, driven by bad mortgage loans, falling home prices and the credit crunch.
Here's what you need to know about the safety of your bank accounts:
Don't expect to call it. It's virtually impossible to tell in advance which institutions will fail. Some can limp along for years and then recover; some can plunge from seeming strength into chaos virtually overnight.
You can (and should) consult ratings services such as Bankrate.com's Safe and Sound system or TheStreet.com ratings so that you have some idea of your institution's relative strength, said longtime banking analyst Bert Ely of Ely & Co. But you should understand that these ratings are largely based on the banks' own reports of their financial condition, known as "call reports." Fraud and other problems can be hidden for months or even years.
"I've been reading call reports for 25 years, and every once in a while I still get surprised," Ely said. "The rating services are not bad, but they're not foolproof."
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Know your coverage. Bank accounts are typically insured to a limit of $100,000 per depositor per insured bank. (Find out here if your bank is FDIC-insured.) That limit is pushed to $250,000 for certain retirement accounts, such as individual retirement accounts (IRAs), and you can get even more coverage with so-called "pay on death" accounts that name beneficiaries. If you name your three children as beneficiaries on a POD account, for example, each child would get $100,000 of coverage, for a total of $300,000 for the account.
Talk back: Should we bail out the banks?
To get an estimate of your coverage, check out the FDIC's interactive tool. If your money's in a credit union, your accounts probably are insured to similar limits by another government agency, the National Credit Union Administration. Check here.
Have more money in the bank than you have coverage? Transfer the excess to another bank (not just another branch of the same bank; that doesn't increase your coverage). If your bank fails, you may get back only cents on the dollar for any funds in excess of FDIC coverage limits.
"The best thing you can do," Ely said, "is spread your money around."
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Think positive. |
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kavajava
Penny Collector Member
USA
490 Posts |
Posted - 09/20/2008 : 10:38:34
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Although I don't have to worry about "spreading my money around" it seems very prudent at this point in time to heed this advice...
Another thing many may not be thinking about is money market accounts--these are not insured by the FDIC...also, last week one actually lost value, which may be a sign of things to come...I actually moved the majority of my money mkt funds to a bank account--at this point the little bit of extra interest is not worth the risk to me... |
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Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
 Posted - 09/20/2008 : 18:45:16
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quote:
Originally posted by kavajava
Another thing many may not be thinking about is money market accounts--
Actually, I think these too are now backed by US taxpayers now....
Baaaaaah, baaaaaah, baaaaaah..... I don't want to be sheared! |
"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
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What if your bank is seized?
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