We have received questions about the Federal Deposit Insurance Corporation (FDIC) and deposits. The FAQ section below is from FDIC. The question not asked in the FDIC FAQ section is what if FDIC goes bankrupt which reports suggest FDIC is already bankrupt.
FDIC Deposit fund had negative $8.2B balance in Q3 . The Treasury has their back. But let’s not forget – The FDIC does not have a legal “full faith and credit” guarantee from the US Federal Government and Treasury.
It has a “sense of Congress” resolution, but not a formal, legally-binding guarantee.
Credit Unions have a similar Insurance program. Keep in mind, the deposit money in banks does not belong to the banks, it is your money. Banks use your money to leverage their investments. If they make poor investment decisions, it can cost you.
FDIC deposits over the $ 250,000 mark are lost. If your company, business or you personally deposit more than $ 250,000 in one bank in one account, you are always at risk of loosing anything over the $ 250,000.
FDIC Frequently Asked Questions
What is a bank failure?
A bank failure is the closing of a bank by a federal or state banking regulatory agency. Generally, a bank is closed when it is unable to meet its obligations to depositors and others. This deals with the failure of “insured banks.” The term “insured bank” means a bank insured by FDIC, including banks chartered by the federal government as well as most banks chartered by the state governments. An insured bank must display an official FDIC sign at each teller window.
What is FDIC’s role in a bank failure?
In the event of a bank failure, the FDIC acts in two capacities. First, as the insurer of the bank’s deposits, the FDIC pays insurance to the depositors up to the insurance limit. Second, the FDIC, as the “Receiver” of the failed bank, assumes the task of selling/collecting the assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit. (Another words, FDIC takes your money over $250,000 and sells your money to the highest bidder and FDIC takes it “cut” from the sale. One other point assets can and do many times include real estate. If your home is worth more than the insured limit, you could be forced to pay the difference of a failed bank’s mortgage asset.)
What is the purpose of FDIC deposit insurance?
The FDIC protects depositors’ funds in the unlikely event of the financial failure of their bank or savings institution. FDIC deposit insurance covers the balance of each depositor’s account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank’s closing.
What is the FDIC insurance amount?
The standard insurance amount is $250,000 per depositor, per insured bank, for each ownership category. This includes principal and accrued interest and applies to all depositors of an insured bank.
Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.
Deposits maintained in different categories of legal ownership at the same bank can be separately insured. (Krum’s Note: Notice the keyword here is different. That means more than one account in a variety of names)
Therefore, it is possible to have deposits of more than $250,000 at one insured bank and still be fully insured.
Who does the FDIC insure?
Any person or entity can have FDIC insurance on a deposit. A depositor does not have to be a citizen, or even a resident of the United States. FDIC insurance only protects depositors, although some depositors may also be creditors or shareholders of an insured bank.
What does FDIC deposit insurance cover?
FDIC insurance covers deposits received at an insured bank. Types of deposit products include checking, NOW, and savings accounts, money market deposit accounts (MMDA), and time deposits such as certificates of deposit (CDs).
What is the source of funding used by the FDIC to pay insured depositors of a failed bank? The FDIC’s deposit insurance fund consists of premiums already paid by insured banks and interest earnings on its investment portfolio of U.S. Treasury securities. No federal or state tax revenues are involved. (Krum’s Note: Look at Foreign Investment in the US and the portfolio here. Then check out this pdf file showing what China holds in America here .)
How am I notified when my bank has been closed?
The FDIC notifies each depositor in writing using the depositor’s address on record with the bank. This notification is mailed immediately after the bank closes.
When the failed bank is acquired by another bank; the assuming bank also notifies the depositors. This notification usually is mailed with the first bank statement after the assumption.
Every effort also is made to inform the public through the news media, town meetings, and notices posted at the bank.
In plain English, a derivative in real estate means a value on real estate property that was decided upon various factors. When the banks have a percentage of their portfolio in derivatives it means the banks have loans on real estate where the loan value is based upon various factors. What are the various factors? Tranches are one example. A Tranche is a package of loans. The bottom line? Loans were made on real property not based on fair market appraisals but on how many loans are put into a package of loans (tranches) and a speculation of what the property value should or could be (derivative). So why am I writing about this?
I read a very good article on World Net Daily. An interesting point I want to mention is quoted.
“According to the latest numbers from the Treasury Department, JPMorgan and Goldman Sachs are holding the bag on 60 percent of the world’s derivatives – an astonishing $120 trillion between them, Still reports.
But instead of being held responsible for the collapse of the world economy, they were rewarded during the debacle by being allowed to absorb their primary competitors.”
“JPMorgan was the biggest winner in the government bailouts, after receiving a $25 billion loan, it gobbled up Bear Stearns‘ assets for about two cents on the dollar and then the assets of Washington Mutual – the nation’s largest failed bank – for less than a penny on the dollar. Goldman Sachs received approximately $50 billion, but both firms have now repaid the government.”
“According to Treasury figures at the end of June, Morgan held a staggering $80 trillion in derivative exposure, 50 times more than its $1.6 trillion in assets. Goldman Sachs is in an even more precarious condition. It holds $40 trillion in derivatives backed by assets of only $120 billion – a leverage of 333-to-1.
“To put this into perspective,” said Still, “The Gross Domestic Product of the United States is a mere $14 trillion. Even the world GDP is only $65 trillion, and the best estimate of the worth of everything in the world is only $200 trillion. That’s how big these numbers are.”
“Mega-investor Wayne Rogers is certainly not shy about identifying the problem. On “Cashing In” on the Fox News Channel Saturday, he put it this way: “Goldman Sachs is a conspiracy with the government. They are a fascist organization. They are supplying the guy who is the secretary of the Treasury, then he goes back to Goldman Sachs. Meantime he owns 800,000 shares of Goldman Sachs and Goldman Sachs gets bailed out by the government. The whole thing is outrageous. Let them go down.”
Read the rest of the article from World Net Daily here and there is a short four minute video you might find interesting.
Total bank failures so far for 2009? 106 Three of the latest bank failures – Florida. Partners Bank located in Naples, Florida Hillcrest Bank, also in Naples, Florida and Flagship National Bank of Sarasota, Florida. Minnesota and Wisconsin felt the bank failure sting as well. Riverview Community Bank located in Otsego, Minnesota and Bank of Elmwood in Racine, Wisconsin failed.
The bank failure list continues to grow in spite of Congress’ claim of saving banks through bailouts. One might ask, ‘What banks did the American taxpayer bailout? Is there a connection between the banks bailed out and Congress representatives? ‘ 106 bank failures in ten months – AFTER – bank bailouts leads our readers to ask – What was the purpose of the bailout money?
Here is a copy of the press release.
First Federal Bank of Florida, Lake City, Florida, Assumes All of the Deposits of Flagship National Bank, Bradenton, Florida
| FOR IMMEDIATE RELEASE
October 23, 2009
Flagship National Bank, Bradenton, Florida, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Federal Bank of Florida, Lake City, Florida, to assume all of the deposits of Flagship National Bank.
The four branches of Flagship National Bank will reopen on Monday as branches of First Federal Bank of Florida. Depositors of Flagship National Bank will automatically become depositors of First Federal Bank of Florida. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers should continue to use their existing branch until they receive notice from First Federal Bank of Florida that it has completed systems changes to allow other First Federal Bank of Florida branches to process their accounts as well.
This evening and over the weekend, depositors of Flagship National Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
As of August 31, 2009, Flagship National Bank had total assets of $190 million and total deposits of approximately $175 million. First Federal Bank of Florida did not pay the FDIC a premium for the deposits of Flagship National Bank. In addition to assuming all of the deposits of the failed bank, First Federal Bank of Florida agreed to purchase essentially all of the assets.
A whopping 98 Banks have failed in 2009 and we have three more months to go.
And 26 banks failed in 2008.
Compare to 27 banks failed from 2000 until 2008.
I thought the bank bailouts were going to save the banks. Yet since the bailouts, bank failures have been five times higher than prior to the bank bailouts. Maybe you need to ask your Congressman/woman why the disparity. Then ask what was the purpose of the bailout. Then you may want to tell them to repeal the law.
I thought I’d look at the states that have failed banks, do they have a Democrat or Republican governor? Here are my results: 47 Democrat entries 51 Republican entries. We know Arnold Schwarzenegger of California, Charlie Crist of Florida and probably Sonny Purdue of Georgia are not conservative Republicans – they are very liberal Democrats who couldn’t get elected unless they ran as a Republican. They will be added to our Lip Service Candidate list here.
List of the 98 failed banks for 2009:
|Southern Colorado National Bank||Pueblo||CO||August William “Bill” Ritter, Jr||Democrat|
|Jennings State Bank||Spring Grove||MN||Timothy Pawlenty||Republican|
|Warren Bank||Warren||MI||Jennifer M. Granholm||Democrat|
|Georgian Bank||Atlanta||GA||Sonny Perdue||Republican|
|Irwin Union Bank, F.S.B.||Louisville||KY||Steven L. Beshear||Democrat|
|Irwin Union Bank and Trust Company||Columbus||IN||Mitch Daniels||Republican|
|Venture Bank||Lacey||WA||Christine Gregoire||Democrat|
|Brickwell Community Bank||Woodbury||MN||Timothy Pawlenty||Republican|
|Corus Bank, N.A.||Chicago||IL||Pat Quinn||Democrat|
|First State Bank||Flagstaff||AZ||Janet Napolitano||Democrat|
|Platinum Community Bank||Rolling Meadows||IL||Pat Quinn||Democrat|
|Vantus Bank||Sioux City||IA||Chester John “Chet” Culver||Democrat|
|InBank||Oak Forest||IL||Pat Quinn||Democrat|
|First Bank of Kansas City||Kansas City||MO||Jay Nixon||Democrat|
|Affinity Bank||Ventura||CA||Arnold Schwarzenegger||Republican|
|Mainstreet Bank||Forest Lake||MN||Timothy Pawlenty||Republican|
|Bradford Bank||Baltimore||MD||Martin Joseph O’Malley||Democrat|
|Guaranty Bank||Austin||TX||Rick Perry||Republican|
|CapitalSouth Bank||Birmingham||AL||Bob Riley||Republican|
|First Coweta Bank||Newnan||GA||Sonny Perdue||Republican|
|Community Bank of Nevada||Las Vegas||NV||James Arthur “Jim” Gibbons||Republican|
|Community Bank of Arizona||Phoenix||AZ||Janet Napolitano||Democrat|
|Union Bank, National Association||Gilbert||AZ||Janet Napolitano||Democrat|
|Colonial Bank||Montgomery||AL||Bob Riley||Republican|
|Dwelling House Savings and Loan Association||Pittsburgh||PA||Edward G. Rendell||Democrat|
|Community First Bank||Prineville||OR||Ted Kulongoski||Democrat|
|Community National Bank of Sarasota County||Venice||FL||Charles Joseph Crist, Jr.||Republican|
|First State Bank||Sarasota||FL||Charles Joseph
|Mutual Bank||Harvey||IL||Pat Quinn||Democrat|
|First BankAmericano||Elizabeth||NJ||Jon Stevens Corzine||Democrat|
|Peoples Community Bank||West Chester||OH||Ted Strickland||Democrat|
|Integrity Bank||Jupiter||FL||Charles Joseph Crist, Jr.||Republican|
|First State Bank of Altus||Altus||OK||Brad Henry||Democrat|
|Security Bank of Jones County||Gray||GA||Sonny Perdue||Republican|
|Security Bank of Houston County||Perry||GA||Sonny Perdue||Republican|
|Security Bank of Bibb County||Macon||GA||Sonny Perdue||Republican|
|Security Bank of North Metro||Woodstock||GA||Sonny Perdue||Republican|
|Security Bank of North Fulton||Alpharetta||GA||Sonny Perdue||Republican|
|Security Bank of Gwinnett County||Suwanee||GA||Sonny Perdue||Republican|
|Waterford Village Bank||Williamsville||NY||David A. Paterson||Democrat|
|Temecula Valley Bank||Temecula||CA||Arnold Schwarzenegger||Republican|
|Vineyard Bank||Rancho Cucamonga||CA||Arnold Schwarzenegger||Republican|
|BankFirst||Sioux Falls||SD||M. Michael Rounds||Republican|
|First Piedmont Bank||Winder||GA||Sonny Perdue||Republican|
|Bank of Wyoming||Thermopolis||WY||Dave Freudenthal||Democrat|
|Founders Bank||Worth||IL||Pat Quinn||Democrat|
|Millennium State Bank of Texas||Dallas||TX||Rick Perry||Republican|
|First National Bank of Danville||Danville||IL||Pat Quinn||Democrat|
|Elizabeth State Bank||Elizabeth||IL||Pat Quinn||Democrat|
|Rock River Bank||Oregon||IL||Pat Quinn||Democrat|
|First State Bank of Winchester||Winchester||IL||Pat Quinn||Democrat|
|John Warner Bank||Clinton||IL||Pat Quinn||Democrat|
|Mirae Bank||Los Angeles||CA||Arnold Schwarzenegger||Republican|
|MetroPacific Bank||Irvine||CA||Arnold Schwarzenegger||Republican|
|Horizon Bank||Pine City||MN||Timothy Pawlenty||Republican|
|Neighborhood Community Bank||Newnan||GA||Sonny Perdue||Republican|
|Community Bank of West Georgia||Villa Rica||GA||Sonny Perdue||Republican|
|First National Bank of Anthony||Anthony||KS||Mark V. Parkinson||Democrat|
|Cooperative Bank||Wilmington||NC||Beverly Perdue||Democrat|
|Southern Community Bank||Fayetteville||GA||Sonny Perdue||Republican|
|Bank of Lincolnwood||Lincolnwood||IL||Pat Quinn||Democrat|
|Citizens National Bank||Macomb||IL||Pat Quinn||Democrat|
|Strategic Capital Bank||Champaign||IL||Pat Quinn||Democrat|
|BankUnited, FSB||Coral Gables||FL||Charles Joseph Crist, Jr.||Republican|
|Westsound Bank||Bremerton||WA||Christine Gregoire||Democrat|
|America West Bank||Layton||UT||Jon Huntsman, Jr.||Republican|
|Citizens Community Bank||Ridgewood||NJ||Jon Stevens Corzine||Democrat|
|Silverton Bank, NA||Atlanta||GA||Sonny Perdue||Republican|
|First Bank of Idaho||Ketchum||ID||Clement Leroy “Butch” Otter||Republican|
|First Bank of Beverly Hills||Calabasas||CA||Arnold Schwarzenegger||Republican|
|Michigan Heritage Bank||Farmington Hills||MI||Jennifer M. Granholm||Democrat|
|American Southern Bank||Kennesaw||GA||Sonny Perdue||Republican|
|Great Basin Bank of Nevada||Elko||NV||James Arthur “Jim” Gibbons||Republican|
|American Sterling Bank||Sugar Creek||MO||Jay Nixon||Democrat|
|New Frontier Bank||Greeley||CO||August William “Bill” Ritter, Jr||Democrat|
|Cape Fear Bank||Wilmington||NC||Beverly Perdue||Democrat|
|Omni National Bank||Atlanta||GA||Sonny Perdue||Republican|
|TeamBank, NA||Paola||KS||Mark V. Parkinson||Democrat|
|Colorado National Bank||Colorado Springs||CO||August William “Bill” Ritter, Jr||Democrat|
|FirstCity Bank||Stockbridge||GA||Sonny Perdue||Republican|
|reedom Bank of Georgia||Commerce||GA||Sonny Perdue||Republican|
|Security Savings Bank||Henderson||NV||James Arthur “Jim” Gibbons||Republican|
|Heritage Community Bank||Glenwood||IL||Pat Quinn||Democrat|
|Silver Falls Bank||Silverton||OR||Ted Kulongoski||Democrat|
|Pinnacle Bank of Oregon||Beaverton||OR||Ted Kulongoski||Democrat|
|Corn Belt Bank & Trust Co.||Pittsfield||IL||Pat Quinn||Democrat|
|Riverside Bank of the Gulf Coast||Cape Coral||FL||Charles Joseph Crist, Jr.||Republican|
|Sherman County Bank||Loup City||NE||Dave Heineman||Republican|
|County Bank||Merced||CA||Arnold Schwarzenegger||Republican|
|Alliance Bank||Culver City||CA||Arnold Schwarzenegger||Republican|
|FirstBank Financial Services||McDonough||GA||Sonny Perdue||Republican|
|Ocala National Bank||Ocala||FL||Charles Joseph Crist, Jr.||Republican|
|Suburban FSB||Crofton||MD||Martin Joseph O’Malley||Democrat|
|MagnetBank||Salt Lake City||UT||Jon Huntsman, Jr.||Republican|
|1st Centennial Bank||Redlands||CA||Arnold Schwarzenegger||Republican|
|Bank of Clark County||Vancouver||WA||Christine Gregoire||Democrat|
|National Bank of Commerce||Berkeley||IL||Pat Quinn||Democrat|
It appears SunTrust Bank has a (D-) rating reflecting significant weakness. September 2009 will be the next update for SunTrust Bank but a significant weakness can impact depositors and creditors in a negative manner.
Consider about 15 banks are failing each month and although SunTrust did participate in the bank bailouts, taxpayers have been subsidizing SunTrust Bank through the bank bailouts. Just ask yourself, when is the last time any bank did you a favor.
Weak banks are impacted from difficult economic times through magnifying their financial distresses. Most credible experts agree, commercial real estate is the next to tank, just look at vacant stores, malls and strip shops in your neighborhood.
Regarding real estate, as of June 30, 2009 SunTrust Bank shows about $125 million in total loans. A little over $53 million in 1-4 family homes, almost $25 million in “other” real estate, nearly $ 31 million in commercial real estate. If commercial real estate continues to fail, SunTrust Bank could find their rating downgraded again.
Then consider, SunTrust Bank has “standby letters of credit issued by Federal Home Loan Bank” on SunTrust’s behalf in the amount of almost $5.3 million.