Dedicated to Deposits: Deals, Data, and Discussion

Article on Bank Failures and My FDIC Resources


So far this Friday the FDIC has not reported on any bank failure. However, the failures can be reported late Friday especially if the failed bank is in the west. Last week, the FDIC didn't report the closure of Silver State Bank of Nevada until after 9:00pm EDT. Update 9/13/08: The FDIC did not report on any bank failures yesterday.

A reader forwarded me this MarketWatch commentary about bank failures and the FDIC. It's mostly advice about keeping your deposits under the FDIC limits. However, there is an interesting section on the "Anatomy of a bank failure". One thing you may have noticed regarding past bank failures is that uninsured deposits are sometimes transfered to the acquiring bank. In these cases no depositors lose any money even those with uninsured deposits. There have been a couple of these cases this year. The article describes a reason why this happens:
(4) The acquiring bank ... will normally bid on the insured deposits and sometimes the uninsured deposits (usually if the affluent customers are desired by the acquiring bank).

Even though this does happen, you should not assume that it will. As the author stresses in the article, it's very important to keep under the FDIC limits.

Below are some of my FDIC related posts:

Here are a few useful links to FDIC resources:

Thanks to the reader who emailed me that MarketWatch link.

Related Posts

Comments
4 comments.
Comment #1 by marc (anonymous) posted on
marc
I'm really surprised there were no failures this Friday. But I feel a big one coming on for the Columbus Day weekend when the FDIC will get an extra day to clean up...

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Comment #2 by Ari (anonymous) posted on
Ari
following through on July 28 forebearance announcement.

http://biz.yahoo.com/bw/080912/20080912005937.html?.v=1

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Comment #3 by Anonymous posted on
Anonymous
When FDIC head Shelia Bair says her agency might have to bolster the FDIC's insurance fund with Treasury borrowings to pay for the new spate of bank failures, a lot of us, this 40-year banking veteran included, assumed there's an actual FDIC fund in need of bolstering.

We were wrong. As a former FDIC chairman, Bill Isaac, points out here, the FDIC Insurance Fund is an accounting fiction. It takes in premiums from banks, then turns those premiums over to the Treasury, which adds the money to the government's general coffers for "spending . . . on missiles, school lunches, water projects, and the like."

1
Comment #4 by Anonymous posted on
Anonymous
Interesting article in the Wall Street Journal Wednesday on a related subject, http://online.wsj.com/services/article/SB122101423745118083-search.html?KEYWORDS=damian+paletta&COLLECTION=wsjie/6month ("Berkshire, in Blow to Banks, Reins In Its Deposit Insurer").

The opening paragraph: "Warren Buffett's Berkshire Hathaway Inc. has told one of its subsidiaries to stop insuring bank deposits above the amount guaranteed by the federal government, dealing a fresh blow to the financial-services industry as it tries to assuage anxious customers."

Apparently, KBS, the relevant Berkshire Hathaway subsidiary, insured some deposits at Columbian Bank & Trust, of Topeka, Kansas, and lost money when that bank failed in August.

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