Understand How Bank Failures Work

By now you've heard about the recent failure of IndyMac bank. Some saw it coming, and some didn't. Senator Charles Schumer wrote about the bank before customers drained cash, but the FDIC did not have the bank on it's "problem list".

The consensus is that we'll see more bank failures in the coming months, but we can't be sure which ones will go down. What does that mean to you? Is it going to ruin you? For most people, the answer is no. Bank failures happen, and most consumers walk away unscathed.

The main problem I've heard about with IndyMac customers is confusion about FDIC insurance. Some folks thought that having less than $100,000 per account would keep them safe. This is not true, and nothing will bring the lesson home like a bank failure. A better way to think about it is $100,000 per account title per institution. If you have more than $100,000 at the bank, you owe it to yourself to figure out whether or not you're covered.

Further reading:

• How Bank Failures Work
• How FDIC Insurance Works