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What if the FDIC fails?
christopherspenn.com — IndyMac wiped out 10% of the FDIC insurance fund. When should you consider bailing out of FDIC-insured banking?
cspenn- 72 diggs
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- crocev, on 07/13/2008, -2/+7FDIC was created to protect the depositor against bank failure, but assuming that rather small banks failed once in a while. But this insurance was never designed to cope wih a series of big bank failures, let alone caused by a much deeper problem than bad bank management.
So yes, I agree that it would be safe to open accounts on different banks just in case some fail and there is not enough money for all depositors.- siszam, on 07/13/2008, -0/+6I think you missed the point. It wasn't that you should have your accounts spread out. The point is the FDIC can only cover so many bank failures. If they run out money after a hundred failures and you have accounts in banks 102 and 103 it won't matter if you have one dollar or one hundred thousand in those accounts. You will be out of luck.
- scsp85, on 07/13/2008, -0/+8If the FDIC fails, while the economy plummets, and inflation skyrockets; your money won’t be worth much by then anyway.
- adjustafresh, on 07/13/2008, -2/+5"If the FDIC’s insurance fund drops below $10 billion, it would probably be a really good idea to start looking at someplace to store your money other than in a financial institution of the United States of America."
So, the author is calling for a bank run which would certainly lead to failure of FDIC and a much greater financial crisis. There are no easy answers or financial choices in the next few years.- richmomz, on 07/13/2008, -0/+1Gold would be another (smart) option.
- flavioribeiro, on 07/13/2008, -0/+6The US government won't let the FDIC fail. They'll just run the printing presses and pay the account holders up to the FDIC limit. They probably wouldn't pay the $100k all at once, but they would do it eventually.
Keep an eye on Lehman Brothers, folks. - richmomz, on 07/13/2008, -0/+3According to the article the FDIC has about $50 billion in reserves - when you consider that there's trillions worth of bank deposits and other bank assets at stake, you begin to see how things can go bad very quickly with little or no warning. IndyMac took out 10% of those reserves by itself, and its relatively small. If a few more dominoes start falling things could get ugly fast.
Of course the fed could just print more cash and pay it out over time, but by the time you get your money back it will be worth a fraction of its former value due to hyperinflation. - chaserm, on 07/13/2008, -0/+2Folks: Start by taking your money out of WAMU because it's going under sooner than you think and it will clean out all of the FDIC real quick.
- richmomz, on 07/13/2008, -0/+1If ANY of the major banks fail it will probably take out the FDIC in a flash. Better start stuffing those mattresses! lol
- rondoda1, on 07/14/2008, -0/+1Check out my article...top 10 economic collapse safe jobs...great minds think alike my friends...
- subarusqueege, on 08/27/2008, -0/+1FDIC fund is now dry! Look on yahoo financial articles.
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