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Preparing for Bank Failures

As I mentioned in this Tuesday post, the FDIC recently released a report showing a growing number of "problem" banks. This CNN article mentions that the FDIC is bracing for up to 200 bank failures over the next 12 to 24 months. That may sound like a lot, but at the end of the S&L crisis in the late 80's and early 90's there were almost 3,000 (details at this Calculated Risk blog post). The CNN article also has a good overview of how to ensure your bank deposits are safely insured. Below are some resources that I've used for the last several years. I've also included a list of my previous posts on this topic.

Useful External Resources to Check on a Bank or Credit Union:

Few of My Previous Posts on Bank and Credit Union Safety

Related Posts

Anonymous   |     |   Comment #1
It's time to change the insured amount up to $100,000 per account into something like 250,000 first class stamps, or 40% of a law maker's annual salary. The $100,000 is never adjusted for inflation and is quite outdated.
Bill   |     |   Comment #2
I would recommend on doing it per account and let it be like 250k, like ASI is, ASI is per account and is 250k, too bad its not gov backed..
Anonymous   |     |   Comment #3
the possibility of up to 200 banks failing sounds pretty scary.

and maybe it's not as many as in the 80s/90s because of the attrition and consolidation that took place after the s&l crisis.
Sofa King Interested
Sofa King Interested   |     |   Comment #4
Make the account in trust for or payable on death for two relatives. This will give you $200,000 of FDIC and/or NCUA insurance. You still have full and solo power over the account. Most people have two relatives they could put down as beneficiary.
Anonymous   |     |   Comment #5
There can be a subtle but important difference between using a POD for more insurance at a bank vs. credit union.

For example, at a bank each CD is considered a separate account, and each can have different beneficiaries, etc.

At a credit union, you have one share account for you, within which you can have additional things like "certificate numbers" that are part of the same account. Naming PODs on these types of certificates is useful for designating who gets your assets when you die, but is ineffective for getting more NCUA coverage without creating new parent accounts.

Other credit unions might use different terminology, but what I've described here is consistent with NCUA terminology (who I also emailed to confirm all this), so even if your credit union uses terms like "CD account" then good luck trying to map that into NCUA terminology and convincing yourself that your assets are insured.
Anonymous   |     |   Comment #6
200 banks failing is just an estimate. You have to include, unprofitable branches, affiliates, bad interbank loans, bad interbank investments, big investors pulling out, wall street and other factors that may trigger chain reaction of failures.

In that case, hundreds more may be pulled or forced to close the door.
Anonymous   |     |   Comment #7
The Banks can buy extra FDIC insurance if they wanted to.
The problem is cost, for every $1000 that a bank has on the books as deposit, has to pay monthly premium
of about 1 penny to the FEDS.
Since 100,000 is minimum allowed to
purchase per account, cost cutting has priority. Otherwise, instead of
paying interest to the customers,
Banks will have to pay it to uncle sam as insurance premiums.
tu   |     |   Comment #8
Re: comment above on PODs at credit unions ---

For CUs that find it difficult to have different beneficiaries on multiple CDs opened under the same member number, I have sometimes been successful in establishing a second (or third) member account at the same CU. YMMV.
Anonymous   |     |   Comment #9
The FDIC's booklet states if a bank fails, Federal Law requires the FDIC to make payment as soon a possible. Historically the FDIC pays within a few days after a bank closing. I was told today by a bank employer that it can take "years" for the FDIC to pay one for their insured deposits. Does anyone know what is the "real" truth on this matter if a bank one uses, fails? Thanks!
Banking Guy
Banking Guy   |     |   Comment #10
I followed NetBank's collapse last fall, and the FDIC performed as advertised. While following that story, I did find a quote from someone interviewed in a news article who said it took him 2 to 3 months to get back insured funds from a bank that failed in 1991. That has been the only case that I'm aware of in which the FDIC was slower than it advertised. Here's that NetBank post in which I described this case. Unfortunately, the news article doesn't seem to be available any more.
Anonymous   |     |   Comment #11
Does anyone
know where
I can find
latest info
on National
City Bank and/or it's "buy-out"?
Read about
certain big
names considering
it but can
not find if there are
any takers.