Are Your Deposits Safe At The Bank?
Many have wondered whether their bank deposits were safe. The FDIC traditionally guaranteed up to $100,000 in total deposits at any one institution. In response to the banking meltdown last year they increased the guarantee up to $250,000 and then introduced the Temporary Liquidity Guarantee Program which temporarily increased protections guarantees further.
Still, when the Chairman of the FDIC says that they may run out of money this year, there is cause for concern. Indeed, if enough banks fail, the FDIC may run out of funds. Now, I wouldn’t rush out and pull deposits out. Save for a very serious meltdown still ahead, I think it unlikely we see an insolvent FDIC. But you can never rule out the possibility. But lets say your bank does fail, and the FDIC is almost out of money or close to it. You might get your money back, but it may take a while if there is a long queue in front of you. What if you need the money right away or had a big obligation due shortly?
For starters, I suggest at least keeping accounts at two different banks. If possible, keep a few months worth of expenses in each account. Also, inquire into the health of your bank. Finally, for larger amounts a brokerage account may make more sense. Short-term government funds are quite safe. Assets at a brokerage are not subject to being “lent against” by the brokerage, meaning your assets are segregated and are not used as capital for the brokerage to make loans. There is SIPC coverage and usually the broker will purchase additional insurance.
