View Full Version : Question

05-03-09, 11:58 AM
I wasn't sure where to post this.

Has anyone come across an instance where the FDIC has refused to insure a deposit in excess of $250,000? I recall reading of people who had almost 1 million dollars getting there money out of failed banks in CA. This doesn't affect me in the least. I was just curious. I tried Google, but couldn't find any answers.

05-03-09, 12:40 PM
"Depositors without FDIC coverage lost money in at least two recent failures -- NetBank, Alpharetta, Ga., and Miami Valley Bank, Lakeview, Ohio."


the article continues:

Of $109 million in uninsured deposits at NetBank, nearly 30% has not yet been reimbursed. Of $14 million in uninsured funds at Miami Valley, only 5.9% of uninsured funds, so far, has been reimbursed. All deposits in the most recent failure -- Douglass National Bank, Kansas City, Mo. -- have been reimbursed.

Fortunately, FDIC insurance limits have increased on certain accounts in recent years. Certain retirement accounts, for example, now are insured to $250,000, up from $100,000 per person.[this article is from 2/4/08, prior to the recent extension of the $250k limit - jk]

But the tide on FDIC reimbursement of uninsured depositors may have changed in 1991 for the worse. Congress sharply curtailed the FDIC's discretion to extend protection beyond insured deposits. Now the FDIC must enter into the "least costly" transaction when dealing with a troubled bank. So the FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund.

"As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only," said FDIC spokesman David Barr.

By contrast: "Prior to December 1991, the only time that the insurance limit was imposed was when we could not find a buyer for a troubled bank and had to issue checks to depositors for their uninsured funds. The overwhelming majority of the time, we were successful in finding a buyer."

Big and bigger

Weren't you reassured about our deposit-insurance system with the bailouts of three colossal banks in the past -- Continental Illinois, First Republic and Bank of New England? Each large bank approached an eye-popping $40 billion in assets. Today, however, a bank of that size would not rank in the top 40, FDIC chairman Sheila Bair warned in a speech last year.

FDIC data indicate that as of Sept. 30, there were 65 institutions with assets of $18.5 billion on its list of "problem" institutions. Barr would not elaborate on their sizes. Nor will the FDIC name the institutions.

05-03-09, 02:15 PM
Thank you very much JK. So it seems there is no bailout for these folks, eh.