Banking Crises Protecting Your Assets Cash

Sep 28, 2008




Banking Crises: Protecting Your Assets/Cash


This year over 13 banks have failed including IndyMac and Washington Mutual.  The FDIC has a long list of banks on their watch list that are considered risky.   This has led to major concerns regarding the safety of deposits in the financial institutions in the United States.


The FDIC insures the vast majority of the depositors that have less than $100,000 in their accounts.  The depositors with larger amounts are at risk.  They can take several steps to protect themselves in the coming months. Listed below is the information they should find useful.


  • 1. What happens if the bank fails?


This depends on how the bank fails. If another bank buys the bank like in the case of J.P. Morgan Chase buying WAMU then it is business as usual.  It is a seamless transition.  The clients of old bank become customers of the new bank and can write checks and withdraw their money without any interruption.


If no other bank steps in, then FDIC steps in and mails checks up to $100,000 as part of its insurance coverage.  These checks are mailed out within 48 hours.  Those depositors with over $100,000 per person are at risk.  They will receive additional payments as assets of the bank are sold.   They may not get all their money back.


  • 2. How do know which banks are at risk?


You can find financial statements on the banks on the FDIC's Web site The information on Credit Unions can be found on Credit Administrator's Website The FDIC also has a list of institutions that are on their watch list.


There are other credit rating services that grade the safety and soundness of the financial institutions.  The two I would recommend are and They rate the banks on a five-star rating.  Five Star rating is the best One Star being the lowest. Put your money in the highest rated institutions.  Please check these ratings often as there rapid changes during current turmoil.


3. What do I do if I have over $100,000?


Depositors can boost coverage at a FDIC insured institution by having accounts with different ownership categories. These could include retirement accounts which are insured up o $250,000, joint accounts and revocable trust accounts.  They can also have deposits up to $100,000 in several different FDIC institutions.


4. What to do if I have millions of dollars to deposit?


One can insure up to $50,000,000 by depositing their money in a bank that participates in the Certificate of Deposit Account Registry, or CDARS.  The deposit placement services disperse the funds in individual CDs under $100,000 in member banks. A single depositor can place up to $50 million and be covered.  


5. How safe is the FDIC?


The FDIC has over $45 billion available to cover insured deposits.  If the payouts exceed their available funds they can tap into other recourses to protect the depositors.  The FDIC also has credit lines with the treasury Department to cover the insured deposits.  In the early 1990's the FDIC did tap these lines to protect the depositors.


I hope this recap helps the reader.  Please feel free to call me or any of the other B2BCFOS if you need assistance managing your assets.





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