Last night, Washington Mutual became the largest bank failure in U.S. history. While much of its $182 billion in deposits were insured by the FDIC, amounts over $100,000 are not and may be lost forever. In addition, many depositors are reporting challenges in rapidly accessing their funds today, even though they may not be at risk.
Washington Mutual is also the thirteenth FDIC insured bank to fail this year, which is more banks than have failed in the past five years combined. With the anxiety and volatility the financial markets are still experiencing, more failures are practically a certainty during the fourth quarter.
What should you do? Well, certainly don’t panic. Keeping your money safe isn’t hard if you follow a few important guildlines:
Make sure that your bank is FDIC insured.
Don’t put all of your (nest)eggs in one basket. If you have more than $100,000 in deposits, spread them out across multiple institutions. The FDIC insures $100,000 per depositor, not account!
Be wary of money market accounts. Money market accounts are not insured, and several have recently “broken the buck” meaning that your investment has actually declined in value. High yield savings accounts are very competitive with most money market accounts right now, so why take on the added risk?
Make sure you can access some cash quickly. In the event of a bank failure, your funds may be perfectly safe but hard to access for a few days or weeks. Do you have cash-on-hand or an account with another bank that could tide you over?
Follow instructions. Bank runs aren’t as depicted in It’s A Wonderful Life. When a bank is shut down, the FDIC has very strong procedures in place to ensure that depositors get their money bank, which it always updates on its Web site.
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Become Debt Free in 2009
September 27th, 2008 at 4:36 pm
This is a lie, WAMU did go out of business, but it was bought out by JP Morgan.
Second, there are several organizations like the FDIC who are regulated to govern other non-bank financial institutions like Credit Unions. The NCUA actually is a more capitalized organization than the FDIC, which means that if your funds are backed by the NCUA you are in a better position than if they were backed by the FDIC.
Want your money to be safe? Go to a Credit Union. The vast majority of them cannot and do not invest in Mortgage Backed Securities, or even commercial loans to businesses. This means that right now these institutions are not in danger and are not going under.
September 29th, 2008 at 5:00 pm
The key part of the graph is the “YTD” next to 2008!!