Topic of this thread: KNOW YOUR FDIC LIMITS SO YOU DONT LOOK LIKE THESE IDIOTS. Hint: Once FDIC has already taken over, the bank isnt going to fail AGAIN , and AGAIN and AGAIN. Its over. You dont need to run to the bank. Bank runs are easily avoidable if you know your FDIC limits, structure accounts properly at inception, and you can avoid standing in line, flying into a local branch, etc.
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*Very* basic information about FDIC/NCUA Insurance Limits:
Note that FDIC/NCUA insurance coverage on these categories is calculated separately. For example, a husband and wife can attain up to $600K in FDIC/NCUA insured funds at a single financial institution as follows (example partially "borrowed" from gwu1986 in another thread):
This is an honest question that I'm not even sure could happen, but...what happens if FDIC's $53 billion allocation for insuring banks gets used up by 5 or more of the largest banks failing? First IndyMac, next could be Wachovia? and maybe some of the smaller banks, too? Thanks for this discussion.
glxpass said:Preaching to the choir.I agree and although the sentiment of this thread is noble, FW is far too small a crowd to make much of a difference. If you're lucky, this thread will get 5,000 views which maybe equates to about a couple thousand different people, but probably less than 1,000. Of those couple thousand, most FWFers are already knowledgeable about these rules.
Now, if the mainstream media tries to educate people....
But some cynical part of me just wishes to grab some popcorn while watching dummies waste their time and nerves waiting in line for hours in the sun. I mean stupidity and ignorance should have its cost, no?
Besides, how are we gonna keep getting our supply of fine drama stories on CNN money? I'm waiting for an article soon on the poor victim with less than $100k in the bank who waited in line on bank run, got a heat stroke or something like that, and had no health coverage so they ended up losing their home and/or car to pay medical bills. The article would conclude by the victim swearing that from now on, they'll keep all their money in cash hidden in his/her appartment since the banks can't be trusted with it. Better be safe and not earning a penny of interest than sorry.
Lets say a bank with 20b on deposit fails. It has 19b in insured deposits and 1b in uninsured (over the limit, etc). OTS sees that the bank has only 19.5bil in assets and shuts it down.
Wouldn't this mean that the bank has assets to cover the 19b in insured deposits, plus about 500 million leftover to cover half of those deposits over insurance limit? Those people with uninsured funds would get half of their money, and FDIC reserves end up untouched.
I know I am simplifying as there are plenty of other costs, such as salaries for temporary staff, all kinds of organizational expenses to set things up, etc.
If FDIC is saying their cost of this failure will be 4-8b, wouldn't that mean that the bank has only about 19 minus (4-8) = 11-14 billion of assets? If so, why would those who are uninsured get anything, such as 50% advanced dividend being given out?
I tried to research this and look at FDIC historical payouts and assets but ran out of lunch time
Can someone actually explain the nitty gritty of a bank failure.
lets say you're smart, did your homework, and have a max of $100K in IndyMac today. The bank failed last week and you can't access your funds at this time.
1. what happens to interest? FDIC articles say "PRINCIPLE" is protected.
2. what happens during the interim, do you continue to earn interest
3. does nothing change, and one day the bank gets renamed and you get a statement from a new instituion?
4. what is the average time it takes to receive funds after a bank failure? Days? Weeks? Months? Some articles suggest up to 90 days.
What is the flow? Does anyone know?
SUCKISSTAPLES points out a good detail about insurance, but what about liquidity? What if you need your money fast? i.e. how and when do you actually get your money back from the FDIC.
sailmaster1955 said:Can someone actually explain the nitty gritty of a bank failure.
lets say you're smart, did your homework, and have a max of $100K in IndyMac today. The bank failed last week and you can't access your funds at this time.
1. what happens to interest? FDIC articles say "PRINCIPLE" is protected.
2. what happens during the interim, do you continue to earn interest
3. does nothing change, and one day the bank gets renamed and you get a statement from a new instituion?
4. what is the average time it takes to receive funds after a bank failure? Days? Weeks? Months? Some articles suggest up to 90 days.
What is the flow? Does anyone know?
SUCKISSTAPLES points out a good detail about insurance, but what about liquidity? What if you need your money fast? i.e. how and when do you actually get your money back from the FDIC.
In a typical case, including IndyMac situation, it's #3 and thus all of your other questions are not relevant.
lampy2k4 said:Here's a reasonable question I got on my mind.
Lets say a bank with 20b on deposit fails. It has 19b in insured deposits and 1b in uninsured (over the limit, etc). OTS sees that the bank has only 19.5bil in assets and shuts it down.
Wouldn't this mean that the bank has assets to cover the 19b in insured deposits, plus about 500 million leftover to cover half of those deposits over insurance limit? Those people with uninsured funds would get half of their money, and FDIC reserves would be untouched.
I know I am simplifying as there are plenty of other costs, such as salaries for temporary staff, all kinds of organizational expenses to set things up, etc.
If FDIC is saying their cost of this failure would be 4-8b, wouldn't that mean that the bank has only about 19 minus (4-8) = 11-14 billion of assets? If so, why would those who are uninsured get anything, such as 50% advanced dividend being given out?
I tried to research this and look at FDIC historical payouts but ran out of lunch time I wondered the same yesterday? To my simple mind, if the uninsured get paid 50% right away (with the possibility of more down the road), FDIC should not have to dig into their pocket AT ALL.
lampy2k4 said:sailmaster1955 said:Can someone actually explain the nitty gritty of a bank failure.
lets say you're smart, did your homework, and have a max of $100K in IndyMac today. The bank failed last week and you can't access your funds at this time.
1. what happens to interest? FDIC articles say "PRINCIPLE" is protected.
2. what happens during the interim, do you continue to earn interest
3. does nothing change, and one day the bank gets renamed and you get a statement from a new instituion?
4. what is the average time it takes to receive funds after a bank failure? Days? Weeks? Months? Some articles suggest up to 90 days.
What is the flow? Does anyone know?
SUCKISSTAPLES points out a good detail about insurance, but what about liquidity? What if you need your money fast? i.e. how and when do you actually get your money back from the FDIC.
In a typical case, including IndyMac situation, it's #3 and thus all of your other questions are not relevant.
Ok... what about the timing? How long before your money is liquid and in your hands? Countrywide locked up my money for 10 days when they had a run several months ago and they didn't even fail!
sailmaster1955 said:Ok... what about the timing? How long before your money is liquid and in your hands?
There is no timing... you can get your money from an ATM, write a check or do an electronic transfer at any time. The reason FDIC steps in on Friday is so that changes are implemented over the weekend when certain transactions (teller window, checks) are not processed anyway.
sailmaster1955 said: Ok... what about the timing? How long before your money is liquid and in your hands? Countrywide locked up my money for 10 days when they had a run several months ago and they didn't even fail! The bank was closed late Friday afternoon. All insured deposits were available Monday morning. All checks and ATM cards still worked as if nothing had happened. Electronic transfers and billpays are not processed over the weekend anyway and all electronic transfers and billpays scheduled for Monday went through as normal. The web site was up and running Monday morning. All insured accounts kept earning interest as usual and are still earning interest. If your deposits were all within the insurance limits, it's as if nothing had happened. The people lining up all night outside the bank this week are idiots.
Countrywide Bank had a ten day hold on all incoming transfers initiated through their web site until sometime last year. Then they changed it to a five day hold. The hold is disclosed on their web site and in the Application Disclosure Handbook (page 17) which you acknowledge having read when you submit your application and a copy of which is then also mailed to you. It is not uncommon. Most (but not all) banks have a 3 to 5 day hold on ACH transfers initiated from their web site.
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Perhaps Schumer should be reading this, too.
