Posts Tagged ‘banks’

What happens to your money if your bank disappears?

Thursday, November 19th, 2009

Don’t worry, just because your bank has evaporated doesn’t mean your money will too – no screaming necessary. Every major bank in the country is insured by the Federal Deposit Insurance Corporation (FDIC); it’s the government organization in charge of protecting your deposits (up to a certain amount) and keeping the banking system running smoothly. But what happens when a bank outright fails?

Although rare, when a bank does fail the FDIC can step in one of two ways. The preferred method is where the FDIC will try to find a healthy bank to buy the failing bank’s assets, which would mean your funds are transferred over to the better bank. Without you doing anything, your money is automatically put in a safer place. On the other hand, if a buyer can’t be found, the FDIC will write you a check for your money.

How quickly and for how much? The FDIC insures your money up to $250,000 per account and typically sends checks out within a few days of the bank failing. Since the FDIC’s creation, no one has ever lost a single penny of insured funds – a pretty good record for a 76-year-old organization. Either with a new bank or in a hefty check, you can breathe easy knowing you’ll get your money back.

Bailing Out From The Bailout…

Friday, September 25th, 2009

Some banks are doing their best to free themselves of the regulatory requirements imposed on them to ensure the TARP bailout money is put to good use.

  • Early repayment of bailout funds may be a sign that the financial industry is recovering from last year’s crisis, but it’s not yet clear whether banks that repay will change any of their business practices.
  • These ten companies will no longer be subject to TARP-related oversight and restrictions by the government, giving them a potential competitive advantage over companies that have not repaid.
  • The U.S. Treasury began buying stakes in struggling financial institutions in October 2008, with the expectation that it would hold onto those investments for at least 3 years. But Congress recently forced the administration to allow some banks to exit the arrangement just eight months later.
  • The federal government will no longer have a direct stake in banks that repay, but it will continue owning warrants and, according to President Obama, will continue to closely monitor the business practices of all financial institutions.

Facts & Figures

  • Since October, the government has spent $199 billion on TARP funding for 600 different companies. The 10 companies now repaying the funds represent $68 billion of that total.
  • The big ten: J.P. Morgan, Goldman Sachs, Morgan Stanley, U.S. Bancorp, BB&T Corp., American Express Co., Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp., and Northern Trust Corp.
  • TARP restrictions addressed: “executive pay, dividend increases, hiring certain foreign workers for U.S. jobs, and lavish spending on corporate jets and conferences, which fueled a public backlash.”

Best Quote

“These are challenging times, and that’s not going to change simply because we repaid TARP.” – Michael Cavanagh, CFO at J.P. Morgan