Dedicated to Deposits: Deals, Data, and Discussion

FDIC's Website to Assist Indymac Depositors on Insurance Coverage


I was monitoring the FDIC press release site this afternoon hoping we don't see a repeat of last Friday with another bank closure. Instead of news of a bank failure. this press release appeared:
The Federal Deposit Insurance Corporation (FDIC) has created a Web site that enables depositors at IndyMac Federal Bank, FSB, to verify whether their account is fully insured. The Web site also contains a link to FDIC contact information for customers with further questions about their accounts.

To utilize this service, the depositor must enter the account number to determine the account's insured status. A depositor with multiple accounts at a failed bank must enter one account number at a time.

The FDIC would encourage customers to utilize this service if they have questions about their deposit status.

Link: http://www2.fdic.gov/dip/Index.asp

For those who had over a $100,000 at Indymac and are waiting for a meeting with a FDIC claims agent, this may provide some comfort.

This new FDIC website seems to be related to this press release that was issued yesterday. It covers a new rule for the nation's largest banks. In the highlight of the press release, it states that the rule "will require the largest institutions to modify their deposit systems so that in the event of failure, the FDIC can provide depositors prompt access to funds and calculate deposit insurance coverage quickly." So it appears when a large bank fails, depositors will be able to come to this new FDIC website and see how much of their deposits are covered.

This Bloomberg article has more on this new rule. The article also has some history and future changes of FDIC insurance. The $100,000 limit has been in place since 1980 when it was increased from $40,000 to $100,000. If this had kept up with 3% inflation, our present insurance coverage level would be about $221,000.

The good news is that in 2010, the $100,000 limit will start being increased based on inflation. In my opinion, this is long overdue. Not everyone agrees that FDIC insurance should be increased. According to a former FDIC chairman "protecting everybody just erodes the discipline of the marketplace and creates a moral hazard that could bring us bigger problems later."

It would be nice if the FDIC could have this website linked with all banks BEFORE they fail to eliminate any doubt about FDIC coverage. However, that's probably not possible since your coverage status can quickly change (i.e. death of a POD beneficiary). The best way to estimate your coverage now is to use the FDIC's Electronic Deposit Insurance Estimator (EDIE).

For more details about Indymac and the recent closure, please refer to my Monday post.

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Comments
4 comments.
Comment #1 by Anonymous posted on
Anonymous
I've contacted the FDIC regarding Indy and they say if I have (which I do) a small CD <$100k then I really don't have anything to worry about.

Indy (for now) will continue paying the rate at inception through the entire term.
However, there is a possiblity that some other bank might purchase Indy and also MIGHT renegotiate CD rates forcing you to decide to stay at the lower rate or go. At that time CD holders can cash out without the usual penalty.

What I may plan on doing in light of rates recently beginning to rise is wait for an even better rate in 3 or 4 months and then transfer the monies out of Indy.
I just don't know how long the FDIC and/or Indy will allow me to wait before I decide to cash out (and not hit me with the penalty).

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Comment #2 by Anonymous posted on
Anonymous
Thanks for the additional FDIC website information. Having gone to the site, done as I was told and read about the various hoops I will be going through to get back my insured money over $100K, I decided a glass of wine was called for.

The best thing we can all do is accept this as a learning experience. Patience and humor will get us through.

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Comment #3 by BillF (anonymous) posted on
BillF
From the Bloomberg piece:

William Isaac, FDIC chairman from 1981 until 1985, [...] suggest[ed] consumers read the rules and avoid banking with risky institutions.

This gets said a lot and it really amuses me. How does Mr. Isaac propose that the average "consumer" evaluate how risky a given institution is? Perhaps he'd like to see the FDIC publish a list of currently risky banks. I'm sure that wouldn't have any unintended consequences. Bank rating services, while useful, are often out-of-date or otherwised flawed.

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Comment #4 by Anonymous posted on
Anonymous
Disapointed With VANGUARD with Brokered CDs with Indymac. Nothing on their WEB site on the matter and they told me on the phone it will take up to 4 weeks before FDIC will credit our funds to our brokerage account.

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