I recognize some of the fine print in the FDIC insurance (e.g., that they can take as long as they want to pay you off) but my sister (who works in a bank) added some more news for me today--although I might not be stating it correctly. She says the insurance really covers the bank NOT the depositors and if there is a "crash", they will want to see the bank's losses--not the depositor's--they are reimbursing the bank--the bank will then determine from what they get, how to reimburse the depositors. She also said that they only have to reimburse something like a $1.37 per $100 dollars to the depositors.

Weigh in please?

-- te (applpie@aol.com), September 01, 1999

Answers

te,

As a practical matter, the Fed will make sure you get your money. They could print currency or merely let any bank borrow from it to satisfy its depositors. This is basically what the Fed did for brokerage firms after the 1987 crash. If depositors lost money, anarchy would rein and all the beaurocrats would be out of a job. Some may even wind up at the end of a noose. That will never happen as long as Greenspan is in control.

-- mike (maples@voy.net), September 01, 1999.

Greenspin won't be around much longer.

-- Porky (Porky@in.cellblockD), September 02, 1999.

Well if the FED made sure everyone was paid then it would take a wheel barrel full of money to buy a loaf of bread--when the presses run--the dollar weakens--basic supply and demand--If you were on the gold standard you couldn't simply print more money.

-- Boz (boz_inc@yahoo.com), September 02, 1999.

Having your account insured by the FDIC is no better than having a big ol' jar of pennies at your disposal.

-- Gia (laureltree7@hotmail.com), September 02, 1999.

te

Just happened to come across a link on that very subject

FDIC Asset and Liability Backup Program June 9, 1999

One of the potential challenges the FDIC must prepare for is the possible inability to access the business systems and supporting information of an insured depository institution that must be closed because of a Y2K problem

-- Brian (imager@home.com), September 02, 1999.

Te,

I think the $1.37 per $100 your friend referred to is the amount of reserves the FDIC has to reimburse the depositors failed institutions. Similar to the currency situation, FDIC is not designed to handle numerous bank failures at once. In other words, if only 1.37% of the banks failed, then they could pay everyone. Conversely, if all of the banks failed, there would only be enough to pay each depositor $1.37 per $100.

In reference to your comment about the insurance covering the bank and not the depositor: Based on the following from the FDIC's website, I think that sounds about right. At least that's how it will end up in practice if it ever gets to that point.

7. How does the FDIC determine ownership of funds? The FDIC presumes that funds are owned as shown on the "deposit account records" of the insured depository institution. If the FDIC determines that the deposit account records of the institution are unambiguous, those records are binding on the depositor. No other records are considered in determining legal ownership.

http://www. fdic.gov/deposit/deposits/insured/general.html

-- Clyde (clydeblalock@hotmail.com), September 03, 1999.