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In light of all the news surrounding the banking turmoil, including Silicon Valley Bank (SIVB), Signature Bank (SBNY), Charles Schwab (SCHW), First Republic (FRC) and others, we all know by now that the FDIC generally protects your bank deposits up to $250,000.
The FDIC, or the Federal Deposit Insurance Corporation, was established in 1933 during the great depression to help restore trust in America’s banking system. Yahoo Finance sat down with Former FDIC chair Sheila Bair to break down what the FDIC can and cannot guarantee, including those who have more than $250,000. Those individuals should be aware that if the bank fails, they may not be protected.
There are rules on the FDIC website, for instance, joint accounts can get more and trust accounts can get more, but the general rule is $250,000.
Want to learn more on what the FDIC does and what it all means for you? Watch the video above.
DAVE BRIGGS: The Federal Deposit Insurance Corporation, or FDIC.
– FDIC.
– The FDIC.
– The FDIC.
SEANA SMITH: The FDIC, the Federal Deposit Insurance Corporation, was established during the Great Depression to restore our faith and our trust in America’s banking system. But what does it do?
SHEILA BAIR: Its job is to protect your deposits that you put in regulated banks. Regulated banks will have a sign that says, FDIC insured. And it will also say what the deposit limit is. The current cap is $250,000.
The FDIC has a perfect record of protecting insured deposits. Not only that, but the policy has been– we did it every single time during the Great Financial Crisis. You’ll have access to your insured deposits within one business day if your bank fails. For those who have more than $250,000, though, they should be aware that if the bank fails they may not be protected.
SEANA SMITH: So how do banks turn a profit? Well, they keep a portion of the money you deposit as cash or reserves to handle those day to day withdrawals. But the majority of your money is invested. And it’s invested in mortgages, car loans, Treasury bonds, the list goes on. And they make their money from the interest that’s earned on those investments.
SHEILA BAIR: Sometimes, banks do stupid things with your deposits. Yeah, doesn’t happen very often, but sometimes it does. And that’s why the FDIC is there. If the bank does stupid things with your deposits, and loses too much money, and becomes insolvent, the FDIC is going to swoop in and make sure that your insured deposits are whole.
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