Wednesday, January 28, 2009

Is your money safe?

By Jenny Sutton

In current economic crisis, many people wonder if their money is safe in failing banks. Fortunately, the Federal Deposit Insurance Corporation (FDIC) insures banks throughout the United States. More importantly, it is crucial to know what exactly is insured and the limits to the FDIC.
With quick research, an investor can discover that their checking deposits, NOW accounts, savings accounts, and time deposits are all covered up to $250,000 in insured banks. Looking more closely, money invested in stocks, bonds, life insurance, mutual funds, annuities and more are not accounted for under the FDIC. This may be deceiving since they are bought through an insured bank, yet they are still risky endeavors. Furthermore, if a joint account exists, the FDIC insures up to $500,000 ($250,000) for each of the accountholders.
To relate the current crisis with the past, we can look back to find the origination of the FDIC. President Franklin Roosevelt called for this deposit insurance in response to the bank panic in 1933. With the creation of the FDIC, as well as other government regulation, the panic soon was resolved and the economy got back on its feet. The question is, can we handle today’s crisis in a similar way?

The U.S. Banking Panic of 1933 and Federal Deposit Insurance by Julio J. Rotemberg and Sabina M. Ciminero. Harvard Business School.

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