Deposit Insurance

How FDIC deposit insurance works

(EXAMINER) - The FDIC announced this weekend for more institutions that were closed. These are listed on the FDIC home page. So far this year the FDIC has taken over 81 financial institutions compared to 26 for 2008 and 3 for 2007. These numbers compare to approximately nine thousand during the Great Depression.

As more banks are closed, consumers may wonder how safe their money is in the current economic environment. We’ve all heard about FDIC Insurance. Still, how does all this work?

Overall, the FDIC attempts to sale the deposits and assets to another Bank. Typically this is the scenario, excepting some limited circumstances. An example of these may be where the bank has raised deposits through investment broker channels (Broker Deposits).

In those cases where another bank does not buy the deposits, the FDIC then pays out the deposits. In each case the consumer’s deposits are fully insured up to the FDIC limit. The limit, up until recently, was $100,000. The current limit is $250,000 and will be in effect until January 1, 2014. Some retirement accounts will continue to be insured up to $250,000 beyond that date.

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