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Are Your Bank Deposits Safe?
Without the FDIC, thousands, if not millions, of Americans would see their life savings wiped out, their confidence in our banking system shaken and our economic foundation threatened.
Seems like every day another FDIC article is published and people start withdrawing funds. Does the news about bank deposits freak you out?
It may, but that’s not my intent.
After the Great Depression, the Federal Deposit Insurance Corporation (FDIC) was established as an independent government agency to insure deposits in banks. The agency guarantees depositors’ funds up to a certain amount, now at $250,000 per depositor, per insured bank.
That means if you and another individual have a Joint account at one bank, then the account is insured up to $500K. Have an individual account elsewhere? That’s another $250K.
Banks pay into this system. After all, a bank that promotes itself as FDIC-insured is likely to get more depositors.
Recent news shows some banks failing, like Silicon Valley (SVB) or First Republic. The assets they purchased and/or loans they granted overextended their balance sheet, with a combination of economic pressures (hello increasing interest rates).
News about this situation goes public, and everyone wants to withdraw = a classic Run on the Bank.
What do you do?
The best course of action is your initial decision in choosing a bank to hold your funds. (Trust me - a bank is better than a mattress.)
Choosing a national bank that is FDIC-insured, and your deposits are below the $250K threshold per depositor is likely the best solution. I say “likely” because failures, although rare, can happen.
So call your bank or check them out online. Look for “Member FDIC” wording. If you don’t see it, it may be time to consider other options.
While we shouldn’t rely on the government to bail us out, the most recent crisis prompted the US Treasury to “make all depositors whole.” (Link below)
In this world, that’s about the best we can hope for.
Hey, it’s still better than that mattress.
Save On,
Chris