Does anyone have any reliable information or direct experience with the processing of FDIC coverage for deposits with a “failed” bank (i.e., a bank which has been closed by the FDIC and whose assets are sold to another bank or liquidated)? 

My inquiry is prompted by my thought to shop for FDIC-insured high-yield CDs without regard for the strength of the depository bank (treading water for a bit until this market settles down—however it settles down).  An article in the Wall Street Journal (August 27, p. A1) reports that banks will be competing for deposits to raise funds to pay loans coming due.  The article appears to be supported by some recent CD offerings—particularly, it appears, by banks which have been variously described by the media as “crippled” or “troubled.”  I expect that most of those banks will achieve a full resolution of their current problems in due course; but, doubtless, some will fail. 

A reasonable amount of due diligence seems to me to support a conclusion that there is no reason for concern whether FDIC insurance and FDIC administration of a failed bank will provide for the payment of customer deposits (in accordance with FDIC rules, of course).  Nonetheless, I’m curious about the process.  For example, will payment be made promptly when due and in accordance with the terms of the deposit? 

And otherwise is there any reason not to purchase CDs offered by a “troubled” bank? 

Thank you for any information you are able to offer.  Regards, Al.