August 26, 2008
A chill went up the spine of many investors when they heard about the federal takeover of a big California bank. So now people have another worry to add to the list of economic problems: bank failures. The biggest question on most people's minds is: Should I feel safe about my money in banks?
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"The general answer is a big 'yes.' You need to do a couple of things. You first of all need to find out of your financial institution - your bank or savings and loan - is federally insured. Most of them are, but make sure it is. Secondly, you need to make sure that the amount of money you have in your account is under the maximum that will be insured. Usually, that's $100,000. There are some accounts where it's as much as $250,000. If you're above that, then you need to move your money. You need to move some of that money and set up a different account at the bank under a different name or go to another bank. Just make sure that your accounts are under the federal insurance limit, and after that, you're going to be fine. This is why this federal insurance was set up. Every year, we do actually have banks fail. This is not uncommon. The number of failures tend to go up if the economy is bad, like it is now. Actually, the largest number of bank failures - of financial institutions, I should say - did not occur during the great depression of the 1930s. Actually, it occurred during the 1980s, the so-called savings and loan crisis, when we had a lot of savings and loans go under. But people should sleep fine at night. We're not going to have a big banking collapse in this country. But do follow those couple of recommendations that I gave, and you'll be fine."
Posted by Dave at August 26, 2008 08:00 AM