The IndyMac Bank failure got me thinking about something most of us take for granted: Federal Deposit Insurance Corporation, usually referred to as FDIC, protection of our bank accounts.
According to the FDIC Web site, insured deposits usually are available to customers of a failed bank within a few days. Since the inception of the FDIC in 1933, no depositor has ever lost a penny of insured deposits.
The key phase is "insured deposits," which means the amount meets the agency's limits. The amount $100,000 is tossed about, but there are some specifics that need to be noted, primarily in regard to the various account categories.
Single accounts: For accounts owned by one person and titled only in that person's name, the money in all such solo accounts counts toward the $100,000 insurance limit. That means if you have a checking account and a CD at the same FDIC-insured bank, both account amounts are added together and that total is insured up to $100,000.
Remember, it's per person and per bank. So if you have $100,000 in ABC Bank and $100,000 in XYZ Bank and both FDIC-insured institutions fail, each account is fully recoverable.
Joint accounts: These accounts are owned by two or more people. If the owners have equal rights to withdraw money from a joint account, each person’s shares of all joint accounts at the same insured bank are added together and the total is insured up to $100,000 for each owner.
For a couple with a joint checking account and a joint savings account at the same insured bank, like the hubby and I have, each co-owner's shares of the two accounts are added together and insured up to $100,000, providing up to $200,000 in coverage for the couple's joint accounts.
For example, the hubby and I have a hypothetical $200,000 CD at an insured bank with equal access to the account funds. So the hubby has $100,000 and I have the other $100,000 and we're OK if our bank fails, since we each get $100,000 of coverage.
If, however, our CD earnings bumped our account total up to $220,000 -- since we're being hypothetical, we're getting a great interest rate on this CD! -- that would put each of us $10,000 over the insurance limit.
Retirement account added coverage: While the basic insurance amount is $100,000 per depositor per insured bank, retirement accounts get added coverage. IRAs are insured up to $250,000 per depositor per insured bank.
Additional assets uncovered: But other assets aren't usually protected by the FDIC.
As the fine print on bank literature and Web sites notes, the FDIC does not insure money you invest in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if you purchased these products from an FDIC-insured bank.
Calculate your FDIC coverage: You can calculate your bank insurance coverage at EDIE, the FDIC's online Electronic Deposit Insurance Estimator.
You also can get download a copy of Your Insured Deposits: FDIC's Guide to Deposit Insurance Coverage, which has details on insured account ownership categories, or you can order a copy by calling toll-free 1-877-275-3342.
Bad banks: IndyMac is the fifth bank to fail this year. Between 2005 and 2007, only three banks failed.
However, that escalated failure pace is not a reason for worry, according to the head of the FDIC.
"All bank depositors should understand that their insured deposits are safe," said FDIC Chairman Sheila Bair (reported by Reuters). "The chance that your own bank will be taken over by the FDIC is extremely remote. And if that does happen, you will continue to have virtually uninterrupted access to your insured deposits."
According to FDIC records, in the past 15 years, the federal bank insurance agency has taken over 127 banks with combined assets of $22 billion.
The Pasadena, Calif.-based IndyMac, which was seized Friday, July 11, by regulators after a bank run in which customers withdrew $1.3 billion of deposits over 11 business days, will reopen Monday. It will have a new charter and a new name, IndyMac Federal Bank.
If only real life were as wonderful as the reel life in some of these great old films.
But, alas, there aren't many bankers like George Bailey or towns like Bedford Falls anymore.