Safety of Banks & Insured Deposits
Before opening an account at a bank or savings institutuion, consider the possiblity of failure and closing. Most people assume their deposits are perfectly liquid.
The establishment of insurance systems and other improvements has made it less likely that trouble will occur.
But a saver today has no grounds for assuming that merely because a place is called a bank or savings and loan or credit union or such, it will always pay off on demand. Nor should he assume he knows what an institution means when it says it is “insured” or “safe.”
This graph shows the history of bank failures in the U.S. between 1934 and 2007. Between 1934 and 2007, 3,555 banks closed. (Data is
from the FDIC.)
Some analysts predict bank failures will surge because of the current credit crunch (this May 23, 2008
article from the Wall St. Journal).
In the event of a bank failure, you may or may not get your money immediately. Your funds could be tied up while the details are untangled. Or, a depositor may find that instead of receiving cash, the money may have been transferred to another association. It is possible that “insured” could mean that eventually a member will get his money back, if he lives long enough.
Bottom line: instead of searching the internet for the best rates on savings accounts, checking accounts and CDs, be sure to consider the financial condition of the the institution.
