If you’ve been reading newspapers or watching television news, you have heard the dismal headlines regarding the Federal Deposit Insurance Corporation (FDIC): “FDIC Bank Insurance Fund Down 20% in 2Q”FDIC: Number of Troubled Banks Rises to 416″”FDIC List of Problem Banks Surges, Putting Reserve Fund at Risk.” The list goes on.  While these headlines create panic on the street, you should know that you are safe, provided you stay within the FDIC deposit limit guidelines.  Note that the following information addresses concerns regarding your bank accounts and various certificates of deposit, not your brokerage accounts.

As your Family CFO, our goal is to supervise much of the day to day management of your financial affairs.  While we may not manage your various bank accounts directly, part of our responsibility is to keep you informed about a variety of financial topics, including such things as FDIC limits and how they might affect you.

Many clients’ portfolios include insured bank accounts with large cash balances and Certificates of Deposit.  Now more than ever, clients are focusing on investments that are secure.  The FDIC is a part of the federal government.  That means it has the ability to make rules that affect banks in all 50 states including the District of Columbia, Virgin Islands, Guam, and Puerto Rico.  The FDIC’s biggest job is insuring the savings of millions of Americans held in all the FDIC insured banks across the country, whether they are issued directly from your local bank or as a brokered deposit.

“Insured by FDIC” means that—should the need occur—if the bank doesn’t have enough money to pay back depositors it owes money to, the FDIC ensures that all of the depositors will get their money, up—up to the insurance limit of $250,000.  The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will revert to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts. Those will remain at $250,000 per depositor. That $250,000 maximum applies in each of the following legal ownership categories:

FDIC Deposit Insurance Coverage Limits (Through December 31, 2013)
Single Accounts (owned by one person) $250,000 per owner
Joint Accounts (two or more persons) $250,000 per co-owner
Certain Retirement Accounts (includes IRAs) $250,000 per owner
Revocable Trust Accounts $250,000 per owner per beneficiary up to five beneficiaries (more coverage is available with six or more beneficiaries subject to specific limitations and requirements)
Corporation, Partnership and Unincorporated Association Accounts $250,000 per corporation, partnership or unincorporated association
Irrevocable Trust Accounts $250,000 for the non-contingent, ascertainable interest of each beneficiary
Employee Benefit Plan Accounts $250,000 for the non-contingent, ascertainable interest of each plan participant
Government Accounts $250,000 per official custodian

These eight ownership categories permit individuals with a typical portfolio of accounts to have much more than $250,000 fully protected by the FDIC.

FDIC insured banks must prove they can be run profitably and fairly.  Four times a year they pay a fee for insurance coverage.  The money the FDIC collects from banks is put into the Deposit Insurance Fund (DIF).  Since the start of FDIC insurance, no one who is under the deposit limits has lost a single cent of insured money because of bank failures.

Even though there have been more bank failures in 2009 than any other year since the Great Depression, bank customers need not worry if they have their accounts structured properly.  The FDIC still has billions of dollars in reserve apart from the insurance funds previously mentioned.  In addition, the FDIC could borrow money from the Treasury Department as they did during the savings and loan debacle in the early 90s.  Currently the FDIC has a $500 billion line of credit with the U.S. Treasury Department.

Based on this information you now have the comfort of knowing your deposits are protected by the FDIC.  If you have any questions about your specific bank deposits, and whether they are covered by the FDIC, contact your Moneta Family CFO.

FDIC Fun Facts

  • 1791 – The First Bank of the United States is created in Philadelphia.
  • 1860 – There were 1,562 state banks.
  • 1862 – 7,000 different bank notes were in circulation5,500 fraudulent bank notes were in circulation.
  • 1864 – The dollar became the national currency
  • Panic of 1907 – The subsequent public panic led to runs on banks. These runs led to large-scale liquidations of ‘call loans,’ or loans used to finance stock market purchases. As a result, thousands of businesses failed.
  • 1913 – The Federal Reserve Act of 1913 was enacted in an attempt to bring stability to financial markets after the Panic of 1907 exposed weakness in an uncontrolled system.
  • 1929 – Black Tuesday, October 29, 1929.
  • 1934 – FDIC was established on a temporary basis and offered deposit insurance of $2,500.
  • 1950 – The FDIC deposit insurance coverage level increased from $5,000 to $10,000.
  • 1969 – The FDIC deposit insurance limit increased from $15,000 to $20,000.  ATMs were installed in New York’s Chemical Bankthe installation marked the first use of magnetically encoded plastic.
  • 1970 – Automated Clearing House Interbank Payment System, a private company, was created to clear checks.
  • 1980 – 85 percent of Savings and Loan Associations lost money.  FDIC deposit insurance increased to $100,000 from $40,000.
  • 1989 – Resolution Trust Corporation (RTC) was established as a temporary agency to resolve S&L failures.
  • 1990 – The FDIC insurance premiums increased from 8.3 cents to 12 cents per $100 of deposits. This was the first rate increase since the FDIC began operations in 1934.
  • 1995 – Total deposits in FDIC insured banks exceeded $250,000,000,000
  • 1999 – Annual ATM transactions exceeded $1 billion.
  • 2008 – FDIC deposit insurance increased to $250,000 until December 31, 2009.
  • 2009 – Congress extended the $250,000 FDIC deposit insurance limit to December 31, 2013.
  • The first bank failure listed on the FDIC search tool, if you search all the way back to 1934, was “BANK OF AMERICA TRUST CO.” of Pittsburgh, PA on 4/19/1934. Hmm…





Cynthia Barnes, CFP® , MBA, AWMA®

Cynthia is the professional consultant for Chandler Taylor.