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Loading ...How the FDIC Changes Affect You
The Federal Deposit Insurance Corporation (FDIC) is something that was not top of mind for many Americans until recently when the Emergency Economic Stabilization Act of 2008 went into effect. With it, we all heard that the limit for FDIC insured deposits would temporarily increase from $100,000 to $250,000. But how exactly does that affect you and what are the other facts you need to know?
The FDIC was created in response to the bank crisis of 1933 with the intention to prevent widespread bank failures from occurring ever again. Funded with premiums paid by banks and with investment earnings, its purpose is to act as insurance for deposits up to a set limit. Since its inception, no depositor has lost any money in insured deposits as a result of a bank failure.
What is the Emergency Economic Stabilization Act?
The Emergency Economic Stabilization Act of 2008, signed into effect on October 3, temporarily raises the basic category coverage of FDIC insurance from $100,000 to $250,000 through December 31, 2009. After 2009 the limit will revert to $100,000, unless future changes in the law occur. This means that if an FDIC-insured bank closes, customers will be reimbursed for up to $250,000 per deposit category.
What accounts are covered?
FDIC insurance covers all types of deposits received at an insured bank including deposits in savings, checking, money market and certificates of deposits (CDs). Safe deposit boxes, and their contents, are not insured.
Does that include retirement accounts?
The FDIC generally provides separate coverage for certain retirement accounts, such as individual retirement accounts (IRAs) and Keoghs. However, those accounts are already insured up to $250,000, so the Stabilization Act does not affect them.
How are jointly owned accounts covered?
Deposit accounts are insured to $250,000 per depositor per bank. If two people share a joint account, the total account would be insured up to $500,000, or $250,000 per person.
What about non-interest bearing accounts?
On October 14, the FDIC authorized the Temporary Liquidity Guarantee Program that includes a component that fully guarantees all funds — regardless of amount — held in non-interest bearing transaction bank accounts. These are typically traditional checking accounts that allow an unlimited number of deposits and withdrawals at any time. They do not include any type of interest bearing account, such as savings, money markets or checking accounts that earn interest. While financial institutions were able to opt-out of this program after the first 30 days, Johnson Bank has decided to remain in the program and will provide this additional coverage through December 31, 2009 at no additional cost to clients.
For the most up-to-date information on FDIC coverage, visit fdic.gov, our website, or talk to your Johnson Bank advisor.
Watch for upcoming issues of like family… where we’ll discuss other topics that matter to you.
