Tuesday, February 19, 2013

Changes in Federal deposit insurance

Just a heads-up to those who may have missed it:  the Federal Deposit Insurance Corporation changed its rules as of the end of last year.  For the past two years it provided 'unlimited insurance coverage of noninterest-bearing transaction accounts'.  If you had ten accounts with seven different institutions, all of them were covered for the full amount deposited in them.

As of December 31st, 2012, that changed.  'Deposits held in noninterest-bearing transaction account[s] are now aggregated with any interest-bearing deposits the owner may hold in the same ownership category, and the combined total insured up to at least $250,000.'  The display header on the FDIC's Web site currently indicates that this coverage applies to an individual's accounts at each insured institution:

The scary thing is, far too many people actually believe that this insurance will protect them.  As Ann Barnhardt pointed out in her blog entry for February 8th:

... remember, total bank deposits in the U.S. are somewhere around TEN TRILLION DOLLARS and the FDIC deposit insurance fund as of March 31, 2012 had a whopping $15 BILLION.

Bottom line: if you think your bank deposits are "insured" or "safe" because of FDIC protection, you're totally irrational.



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