When IndyMac, the big Alt-A lender based in Pasadena, CA collapsed, there was a major scramble by depositors to get their money out. By then it was too late for most. While control was transferred to the conservatorship of the FDIC, to conserve the assets, and arrange an eventual sale of the bank,those depositors were left to wonder about how much of their money would come back to them.
Those with $100,000 or less, in checking, savings, money market or other typical bank accounts were OK, there was no problem. Same for IRA's, up to $250,000. Mutual funds apparently are not insured, nor are stocks, bonds and annuities,but those asset values should still be there.There are other types of accounts and assets,also accounts titled in joint names,but that is not the discussion today.
So much for the basics. What happens when the depositor has over $100,000 in his insured accounts? Well, in this case, the FDIC is advancing the client 50% of the over $100,000 amount, and the rest will then be settled when the bank has been sold, and those proceeds are distributed.
Two things: the FDIC, from what I understand, is under no obligation to give depositors 50% of excess deposits; they've chosen to do it this, but may not for the next similar situation, and the likelihood of the depositors ever seeing the other 50%, or part of it( they'll see part of, I'm sure) is questionable.
There will probably be losses for depositors. They may be sizable. The good news is that at least 50% of those overages are safe, thanks to the generosity of the FDIC.
I would not necessarily bank on the generosity to carry over to the next bank collapse. If you are in the enviable position of having large deposits in your favorite bank (it's not each account, it's the total number of accounts in a person's name),you may want to think about moving some of this money elsewhere( another FDIC insured bank, not the mattress)!
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