What is FDIC Insurance? The FDIC Insurance, or simply bank insurance, is meant to preserve and promote public confidence in the U.S. financial system by: (1) insuring deposits in banks and thrift institutions for at least $250,000, (2) identifying, monitoring and addressing risks to the deposit insurance funds, and (3) limiting the effect on the economy and the financial system when a bank or thrift institution fails.
The FDIC Insurance was established by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the federal government created in 1933 in response to the collapse of the banking industry in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure. You can learn more about FDIC by visiting the web site at www.fdic.gov.
First, not all financial institutions are FDIC insured. If your bank is not an FDIC bank, your best bet is to take your money elsewhere. If your bank is an FDIC member, the combined amount in your savings, checking, NOW, money market accounts, and certificates of deposit are protected up to $250,000 per depositor per bank. There are a few exceptions that you should read on the FDIC INFO web site.
The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investments were bought from an insured bank. But you are not completely out of luck here either:
Additionally, the FDIC does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of the United States government.
If your bank fails, FDIC will step in and make sure your money will be there. The FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check. However, it may takes longer if the failure is a large and messy one.
Although I don’t have a lot of money right now, we just pulled out our saving for our wedding, my personal accounts as well as my sisters are in Wamu and we plan of pulling out because we don’t want to have to go through 5 days or so of uncertainty. I know the feds would take over or the FDIC would distribute the money, but I just don’t want to have to go through that process or having to stand in line for 3 days
Should I do the same as Atlanta Lady and cash out my small savings ($2500) from Wamu? It is all I have right now, but I do not foresee needing immediate access to it.
Everybody needs to calm down about this. There will be no need for standing in line for your money. If you’re really concerned about the wait, pull out enough money to cover your next bill. Put it somewhere else (hey, how about your mattress?), and forget about losing money.
There are only bank runs because people over-react. If you have good credit, you no doubt have access to cash. I know it’ll cost some money in advance fees, but there’s really no shortage of cash out there.
There is a shortage of patience.
WM is not going to fail. Even if it did, your money is safe. The US Treasury will not — it cannot afford to — let a bank deposit vaporize.
@Barbara — I agree with Bill about no moving the money. If WaMu fails and FDIC cannot give you your money, then we’ll have something else much scarier to worry about.
The government through the FDIC will ensure that people get up to $100,000. But the money comes from the people. Here is something most people are not clear on but it is very critical to the understanding of our current situation. Most people think inflation is rising prices. This is not correct. Inflation is *an increase in the money supply*. Once the money supply has been increased, prices will begin to rise but it doesn’t happen right away, it takes time.
Thus, the inflation (an increase in the money supply) is caused by the Federal Reserve creating more money or credit out of thin air. If the FDIC runs out of money, the Fed will simply create more.
But that’s the problem. The people will end of paying for failed banks whether it is by direct taxation or by inflation.
The big discussion at the moment is the $700B bailout of the bankers on Wall Street who are hugely responsible for the mess we are in. I would like to see this plan scrapped completely and the money saved for the FDIC who will at least put it back in the hands of the people.
Bank runs are not caused because people overreact. They are caused because the bank only holds 10% of its deposits in cash. All bank in the USA are insolvent. That is the nature of the fractional reserve system.
If your bank looks like it may be suffering, you should most definitely move your money to one of the two strongest banks in your state. You can find current lists on the Internet.
@Doug — So far the FDIC did a good job of protecting our money with the transfer of WaMu and now Wachovia deposits. Hopefully, we will never see the day of the government simply printing more money just because they can. That would definitely be the end of the American economy and power.
Pinyo, you need to look up the Federal Reserve, because that exactly what they’ve been doing for decades!
When commodity and real estate prices collapsed, I believe all the banks who were in the mortgage business suffered heavily. The ones that also had big bets on commodities through ultra leveraged derivatives (like JPMorgan Chase) were even more in trouble, to the point where they were effectively bankrupt. Because JPMorgan Chase is an owner of the Federal Reserve (yes, look it up – I also couldn’t believe that the Federal Reserve is OWNED by private business – all my life I assumed it was a branch of the government) and JPMorgan bribes all the major government officials (of course, if it owns the Federal Reserve, it can tell the treasury secretary what to do, or else, no money for the U.S. government)… they invented this plan, to CLAIM that some other bank was insolvent, then cancel their stocks and bonds, and let JPMorgan chase steal all their assets. This made JPMorgan Chase solvent again (that, plus the illegal act of writing their customers’ accounts on THEIR OWN balance sheets to make it look like they have some money, while it was never theirs).
Then they sick some congressmen (on their payroll) and the media to paint a false picture that Washington Mutual was a “bad” bank, writing “toxic loans”, etc. Washington Mutual wrote no more toxic loans than JPNorgan chase. They all conformed with the standards the U.S. government set. Yes, the government, through Freddie and Fannie, set the standards: 5% down, even 0% down. The government wanted people who couldn’t save $20,000 to also own homes. In fact, when FDIC (or OTS) tried to threaten WaMu, WaMu EASILY raised billions more in private investment cash – that shows how strong their financial position was. JPMorgan chase COULD NOT raise any cash – even they committed fraud to make their balance sheet look better.
But the pressure mounted, any day now, JPMorgan chase would not be able to keep up their sham… so they put pressure on FDIC to “seize” (steal) WaMu, and to GIVE them hundred of billions of WaMu’s assets. Now the case is in court, and it appears even the judge is scared of something or someone. Every time the facts show the ugly truth, they just delay, delay, delay…. hoping we all dies of old age and can no longer testify to the facts…
To save our economy (and the environment) we need to turn to renewable energy. This will solve the financial crisis because all of our money is shipped overseas for oil at the rate of
10 million barrels / day * 80$/barrel = about 1 billion dollars EVERY DAY !
People forget this.