United States Bank Failures: Is My Money Safe?

September 29, 2008 · Posted in Banks, Money 

With the economic crisis the United States is experiencing right now, and the growing number of bank failures and seizures because of it, you are likely concerned about your money – and rightly so. The average consumer, however, does not need to worry yet about losing what’s in their checking account. Shareholders and bondholders may face problems, but your savings account is protected by the FDIC, and here is why:
FDIC stands for “The Federal Deposit Insurance Corporation.” It exists to provide insurance for nearly every banking institution, as well as savings and loan institution. The FDIC automatically protects individuals and businesses alike, for up to $100,000, in the event of bank failure. In the case of your retirement funds, the FDIC insures up to $250,000. This basically means that if your bank goes the way of the dinosaurs like Washington Mutual or IndyMac Bancorp have done so recently, your money is guaranteed to be safe up to those listed limits.

As with anything, there are some restrictions to this, of course. The FDIC does not cover absolutely everything, and so certain financial situations will render the insurance coverage null. The coverage extends to the more standard banking procedures, such as checking accounts and savings accounts. It will also cover Money Market Deposit Accounts if yours is one that you can write a small number of checks on a month and Certificates of Deposit that take time to reach maturity.

On the flip side, the FDIC will not cover Treasury bills or other investments backed by the United States government, stocks, bonds or mutual funds. It will not protect your annuity or insurance items, like those for your home or vehicle. Any mistakes made by your bank itself are instead usually covered by their own insurance policies, which is handy because the FDIC doesn’t have those under its protective umbrella, and the same is also true for any fraud committed by bank personnel.

So, to sum it all up: the Federal Deposit Insurance Corporation is an organization that provides you with a means of protecting and recovering losses you may accrue in the event of bank failure. Most depositors with accounts at Washington Mutual and IndyMac will be okay, and most depositors with other banks will be okay, as well, should their banks also fail, but you must absolutely check with your own institutions to be sure, and be careful!


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