duanej:

This FAQ will answer at least some of your questions.

Duane

 

Good source.  If you are within the insured limit your account is safe as long as the FDIC has adequate funds which is similar to  any insurance company's ability to pay their responsibility on a claim.  I would not worry about the FDIC  running out of money.  We know that the Treasury would provide funds if they did get low.  We hope so anyway.

As I mentioned on another post it took about 5 - 6 weeks for Indy Mac Bank customers (the bulk) to get back all their assets that were "insured". Keep in mind that FDIC covers your principal, not interest. So if WaMu failed, they would only pay you interest up until the date the bank fails.So you might have a good chunk of change earning no interest for 1 - 2 months. As already stated, the treasury did step in and gave FDIC about 15 billion to cover the indy mac bank deposits. That 15 billion or as much as possible gets repaid when FDIC is able to eventaully liquidate all the assets. in some cases others might fair better, Integrity Bank of Georgia failed today. Those offices will open as Regions Bank on Tuesday. In that case Regions already paid FDIC to take over the deposit accounts. So it is feasible those checking, savings and cd accounts will continue on without any interuption.

BGF

BGF, do you have a source for your contention that, "As I mentioned on another post it took about 5 - 6 weeks for Indy Mac Bank customers (the bulk) to get back all their assets that were "insured"."

I am not much of a CD fan, but last week I bought a 12 month WAMU CD.  I have no concerns about WAMU going belly up, but if they do, I have no concerns about the quick return of my money.

During the S&L "crisis", I bought dozens of CDs from the highest yielders.  Over the span of 2 years about half of the banks went down the chute.  I was always quickly given the option of holding the CD at a lower rate or receiving the funds plus accrued interest without a penalty for early redemption.  In no case did it take more than two weeks to get my loot back - at which time it went off to another high payer.

FDIC insurance creates moral hazard, but it also contributes to a functioning banking system.  I am willing to provide the banks with needed liquidity - upto the FDIC limits!

Dale G.

I noticed WAMU is still offering the 1yr CD at 5%. I understand Chase could decide to decrease the rate as they see fit, and holders would have the option to stick with Chase or redeem their CDs (including earned interest) without an early withdrawal penalty. But for now they're honoring the 5%. What do you think about putting cash reserves in a WAMU CD post collapse?

 
With all the high yield CDs out there and the economy in flux, bank failures seem more likely now than ever. FDIC insures principal AND earned interest under the specified limits, correct?