Silicon Valley Bank collapsed last month, the second largest bank failure in US history, following Seattle’s Washington Mutual in 2008. Panicked depositors withdrew $42 billion from their accounts after social media posts called into question the bank’s stability when it planned to sell stocks. To raise cash, banks held long-term Treasury bonds that were losing value as interest rates rose, so it was difficult to sell them to get the cash needed for day-to-day operations.

When a second bank failed a few days later, the federal government stepped in to guarantee all deposits in both banks. They wanted to prevent runs on other banks, which would create a nationwide financial crisis. They also knew that these banks handled payroll for several businesses and if they closed, it would take some time for workers to receive their paychecks.

After our financial crisis in 2008, Congress passed the Dodd-Frank bill to regulate banks more closely. Congress and President Trump eased these restrictions in 2018. Many economists and politicians have called for the regulations to be reinstated.

One word keeps popping up in all these discussions – the FDIC. The Federal Deposit Insurance Corporation (FDIC) was established during the Great Depression; Bank runs were common in the 1930s. The FDIC guarantees that your bank deposits are safe, even if the bank goes under. Premiums for this insurance are paid by banks and they protect up to $250,000 in an individual account, up to $250,000 for each person’s share in a joint account.

FDIC insurance covers checking, savings, and money market accounts and certificate of deposit (CD) funds. The FDIC guarantees official items issued by a bank, such as cashier’s checks and money orders, and special accounts such as IRAs. It doesn’t protect things like insurance policies or stocks, even if you bought them at a bank. All banks in Bucks Butte County are FDIC insured.

Not all of us manage our money through banks. Box Butte County has four credit unions. Is our money safe in them? Deposits from these four credit unions are covered by NCUA, the National Credit Union Administration. Like the FDIC, it protects up to $250,000 per credit union member through the National Credit Union Share Insurance Fund. It covers checking, savings and money market deposit accounts, certificates of deposit, cashier’s checks and money orders.

If your financial institution fails, how do you get your money back? You don’t have to do anything. The FDIC or NCUA will contact you with information about how your funds will be returned. Historically, the FDIC and NCUA insurance programs covered losses within days of a bank or credit union closing. The FDIC’s website says they usually pay out the next business day, either 1) by giving each depositor a new account at another insured bank equal to the insured balance of their account at the failed bank, or 2) by giving each depositor a check. Depositors for the insured balance of their account in the bank.

Should you keep your money in a bank or credit union? Absolutely! Keeping cash in your home puts you at risk of theft, fire, flood, loss or damage. Opening an account at any FDIC-insured bank or NCUA credit union ensures that your money is protected in the event of a disaster. You do not need to apply for this insurance; Coverage is automatic.

One of the problems we have today is that people are too willing to believe what they read on social media. A post on Twitter caused Silicon Valley Bank to collapse. With FDIC and NCUA insurance, your money is safe if the financial institution fails.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *