If your bank deposits are covered by the Federal sbi deposit slip Insurance Corporation (FDIC), your money is safe up to $100,000 personally and $250,000 in eligible retirement plans. In fact, depending on how you have structured your accounts, coverage can significantly exceed $100,000 per bank. We have been negative on the outlook for U.S. Bank stocks since early last summer, but FDIC insurance has added a level of safety since its inception shortly after the Great Depression. Social Security and greater flexibility by the Federal Reserve to inject liquidity into the financial system are two other key safety measures helping to prevent another 1929-type collapse.
One of the biggest risks regarding this country’s current financial malaise is more from a “crisis of confidence” in which worries about the banking system creates a run on certain banks, forcing otherwise solvent banks into insolvency.
This is one reason the Fed acted so swiftly when problems erupted with Bear Stearns in March, and more recently, took measures to instill confidence in both Fannie Mae and Freddie Mac with promises of financial backing. Only a year and a half ago, the number of troubled banks on the FDIC list were at record lows, as most banks were enjoying record earnings and soaring stock market valuations. Excess liquidity brought on by historically low interest rates coupled with relaxed, or non-existent, loan covenants created a massive bubble in real estate that has pushed a growing number of banks to the edge. This problem was many years in the making and with real estate representing approximately 60% of all bank assets, investors should not expect a dramatic turn around anytime soon. It is important to keep in mind that the plight of many bank stocks, with many down 70% or more over the past year, does not necessarily correlate with the safety of your deposits in these banks. As long as you make sure all of your bank accounts are FDIC insured you will be fine, and there is definitely no reason to panic. But what are the rules and stipulations of FDIC insurance?