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What to Know About Your Accounts
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When a bank closes and the FDIC is appointed as receiver, the agency will sell the institution's assets to pay its creditors and depositors. If there is enough cash to go around, the FDIC will distribute it in the form of dividend payments to depositors. But it can take a while for all the bank's assets to be liquidated. "It can sometimes take up to four or five years," Ely said.
What happens immediately after a bank fails? Even if your money is insured, can you access it if the bank has closed? Will the ATMs work?
Again, every situation is different, but there shouldn't be much disruption to your access to insured cash, banking experts said. Williams-Dickerson pointed out that even after IndyMac Bancorp of Pasadena, Calif., folded on Friday, customers were able to write checks and use their ATM cards. They did not, however, have access to online banking.
"That's one thing the FDIC does, they not only insure funds but they make sure some other bank down the street or the FDIC itself will come in and operate the bank," said Robert F. Klueger, an asset protection attorney in Los Angeles who has written about this issue.
Are there any warning signs that a bank is about to go under?
Historically, these failures have come as a surprise. "Think of it, two weeks ago, nobody had any thought that IndyMac might fold," Klueger said. "Historically, there have been very few warning signs."
The FDIC does, however, keep a list of "problem" banks. There are 90 institutions on that list, up from 76 at the end of 2007, Williams-Dickerson said. She declined to identify them. This year, she said, there have been five bank failures.
"Every bank on our problem list is not in jeopardy of failing," she said. "It's unlikely that the majority of those banks will fail."
What, if anything, can you do now to protect your money?
Knowledge is key, banking experts said. Sit down and make a list of your accounts, which name or names they are under, which ownership category they fall under. Then go to the FDIC's Web site and read the rules. If your situation is more complicated than that, seek professional help. For instance, if you have money in a living trust, maybe you should contact a lawyer, Ely said.
"There are a surprising number of folks who don't understand what their banking arrangements are," he said. "Understand how your accounts are arranged."
Diversification is also important, the experts said. If you have more than $100,000 in any one bank and you're not sure you can work out a structure in which the FDIC could insure more than that, why keep it all in one bank?
"What is the wisdom of having more than $100,000 in one bank in the first place?" Klueger asked. "To have more than $100,000 in one bank is not the most prudent thing in the world."
