FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit.
FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or securities.
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. The FDIC provides separate coverage for deposits held in different account ownership categories.
Depositors may qualify for more coverage if they have funds in different ownership categories and all FDIC requirements are met. (For details on the requirements, go to www.fdic.gov/deposit/deposits.)
Your bank account may not be as safe as you think (or hope). Taking a deeper look at the legal details and the financial depth of the FDIC reveals several troubling details that call into question how the FDIC would fare during a true banking crisis.
The US is coming out of a period of unusually low
banking stress and failures. Since it is typical human behavior to let
one's guard down during tranquil periods, we might legitimately ask if
this has happened with respect to the FDIC.
The Federal Deposit Insurance Corporation (FDIC)
is an independent agency of the
United States government that protects the funds depositors place in
banks and savings associations.
I thought the FDIC has full faith and credit backing by the US treasury?
Actually, no, it does not. The language in Section 14 of the FDIC Act is clear and unambiguous (emphasis mine):
(a) BORROWING FROM TREASURY.-- The Corporation is authorized to borrow from the Treasury, and the Secretary of the Treasury is authorized and directed to loan to the Corporation on such terms as may be fixed by the Corporation and the Secretary, such funds as in the judgment of the Board of Directors of the Corporation are from time to time required for insurance purposes, not exceeding in the aggregate $30,000,000,000 outstanding at any one time, subject to the approval of the Secretary of the Treasury: Provided, That the rate of interest to be charged in connection with any loan made pursuant to this subsection shall not be less than an amount determined by the Secretary of the Treasury, taking into consideration current market yields on outstanding marketable obligations of the United States of comparable maturities.
Now that's pretty interesting. First, that any additional money from the federal government is not a guarantee, but rather a loan, which will only be made subject to the approval of the Secretary of the Treasury. Further, that the loan is to be made at “current market yields." What do you suppose would happen to US Treasury yields during a true emergency? I can imagine a few scenarios where they might skyrocket, and this would serve to compound the difficulty of keeping the FDIC fund solvent.
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