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Your Money in the Bank is Safe

This article was written by in Banking. 28 comments.


Earlier this month, IndyMac, a bank and mortgage lender, collapsed, and through an interesting process the Federal Deposit Insurance Corporation (FDIC) assumed responsibility of the bank’s deposit accounts. This collapse, only a few months after NetBank closed and its deposits were acquired by ING Direct, has people everywhere worrying about their money. The government and consumers hope to determine which banks might be next to fail and depositors are closing their accounts, concerned they might not be able to gain access to their funds once a bank collapses.

ABC News has compiled a list of the ten most likely banks to fail next based on a ratio of the bank’s assets and reserves to its non-performing loans. Popularizing this list could feed panic, which is perhaps what the release of Senator Charles Schumer’s comments about IndyMac did in June. When Schumer’s letters expressing concern about IndyMac’s stability were released to the public the expected reaction ensued. Customers panicked and withdrew their assets from the bank, possibly expediting IndyMac’s fall.

There is no need to panic. As long as you keep less than $100,000 per legal depositor in any banking institution insured by the FDIC, you will not lose your money. Even if your bank fails, the FDIC has $53 billion in a fund set aside for covering customers in the event of a collapse. Even if you keep more than $100,000 in one bank, you will probably still have access to at least part of your money eventually. It would make sense to distribute your funds across banks at no more than $100,000 each.

While your money is safe, it wouldn’t hurt to know where your bank is on the list of those most likely to fail. Here are the ten riskiest banks based on the ratio mentioned above, the “Texas ratio.”

  1. Colorado Federal Savings Bank, Greenwood Village, CO
  2. Eastern Savings Bank, FSB, Hunt Valley, MD
  3. Integrity Bank, Alpharetta, GA
  4. Ameribank, Inc., Welch, WV
  5. First Priority Bank, Bradenton, FL
  6. First Security National Bank, Norcross, GA
  7. Magnet Bank, Salt Lake City, UT
  8. Security Pacific Bank, Los Angeles, CA
  9. First National Bank of Brookfield, Brookfield, IL
  10. The State Bank of Lebo, Lebo, KS

There is no guarantee that these banks will collapse in the above order, nor can anyone promise that any one bank will fail at all. I see no immediate need to move your funds to another bank if your institution is listed above unless you find yourself awake at night worrying. The FDIC has you covered as long as you’re within the correct limits.

Who’s Next? List of Troubled Banks Worries Wall Street, DC, ABC News, July 15, 2008, via Five Cent Nickel and My Two Dollars.

Published or updated July 21, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar Laura

My husband and I double checked with our banks and we’re going to keep depositing as normal and paying down debt. I think the media can do more harm than good when they sensationalize the impact.

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avatar Robin

Are CDs covered as well? My boyfriend’s father keeps insisting they are not.

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avatar Luke Landes ♦127,386 (Platinum)

Laura: The ability to cause panic amongst the public is a dangerous power…

Robin: CDs are insured by the FDIC like other deposit accounts. Here’s an official source that you can show your boyfriend’s father if you’re looking for an “In Your Face!” moment.

I’ll be exploring the facts about FDIC protection in an article going live in a few hours.

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avatar UH2L

Banks and credit unions are insured and you can get more than $100,000 coverage per person with joint accounts.

What you need to watch for are Money Market Accounts from companies. I have a GMAC Money Market Account which pays great interest, but it’s not insured. If GMAC goes out of business, I’m not sure what would happen to my money, so I took a lot out of that account and put it in insured, lower-returning accounts.

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avatar Fred

Eh? Do you mean some entity of GMAC other than GMAC Bank? Because GMAC Bank is FDIC-insured like any other bank. Says so right here (bottom of page):

http://www.gmacbank.com/banking-online/why-gmac-bank.html

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avatar Andrew

There’s a slightly confusing calculator on the FDIC website if you want to plug your account info into it and see what’s covered: http://www.fdic.gov/edie/

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avatar the hobbit

You are right that it is bad for the media to spread panic. But is it right to fail to pass a warning?
It took fully 10% of the FDIC available funds to repay Indy mac depositors. If there are 10 or 20 more banks in trouble, it could overwhelm the insurance facilities funds.

People ought to wake up to the rampant fraud waste and crony ism that characterizes the government.

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avatar Michael

Bank rate offers a service to check the safety of your bank at http://www.bankrate.com/brm/safesound/ss_home.asp

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avatar Jo

The question of whether our money is safe will likely continue until we are out of the woods. The equation, however, is always risk vs rewards, and how much you need the rewards. The more dependent you are on interest income the more compelled you may be to chase rates.The FDIC is talked about as if it is unshakable, and invulnerable, but it wasn’t that long ago that the same could have been said of AIG, Fannie Mae, etc, etc. There are no cast iron guarantees, just what people tell you to keep the game of confidence in play. If you don’t need the income, I’d stay with the safest bank you can find, meaning one that is open about its lack of exposure to derivatives, remain under FDIC limits, spread the risk, and look into US Treasuries. Keep as liquid as you can so you can move funds quickly, check the news, and internet every couple of weeks. If you do need the income, it may be better to cut costs such cable TV, hunt for lower insurance (bigger deductibles), switch supermarkets, don’t buy consumer goods and eat at home. The flip side is you will learn to enjoy books, and learn to cook, and have conversations, and remember how to ride a bike. It will be very good for your soul and your wallet.

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avatar Jo

Oh yeah, just one thing about bankrate.com and any rating agencies for that matter. Is there any reason that we can rely, or trust them any more than we do the institutions they rate? Bankrate.com have put GMAC pretty close to the top of their list for CD rates and security, yet you need to remember it’s association with GM. What a lot of this boils down to is peace of mind. I liken the situation to swimming in the ocean. The rational side of your mind tells you the odds of a shark attack are very low, but somehow those small odds seem to evaporate as you imagine the horror of such an event. It’s human instinct and my advise is always follow it.

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