Can the FDIC go bankrupt?
The Federal Deposit Insurance Corporation (FDIC)
Was established in 1933 and guarantees bank accounts for up to $250,000. But can such an organization go bankrupt?
It's a question that people commonly ask, but the answer is a bit complicated. The short answer is: no, the FDIC itself can't go bankrupt. The longer answer is that it's possible for the bank insurance fund to become insolvent, and for the FDIC to be unable to honor all deposits in its accounts in that event.
Agencies involved in protecting bank deposits
The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve. The FDIC is a government-created institution that guarantees certain types of deposits in member banks. These deposits are insured up to $250,000 per depositor per bank. If your bank fails, and you have more than $250,000 on deposit there, then you're covered by the FDIC up to that amount.
The Federal Reserve System
The second agency, the Federal Reserve System oversees banks' capital ratios and their overall financial health. If your bank is well capitalized and has a healthy balance sheet (meaning it holds sufficient assets against likely liabilities), then the Fed will allow it to continue operating without restriction; if not, it'll require them to take remedial measures or shut them down.
The FDIC cannot go bankrupt under any circumstances
It is formally known as the Federal Deposit Insurance Corporation, and it's a government-backed insurance program that protects bank accounts up to $250,000. The money it has to keep on hand to pay claims comes from assessments that banks pay into the system.
What the FDIC could only pay
This means that if every bank in America were wiped out by some calamity and had no funds left, the FDIC could only pay off a maximum of $250,000 per person or couple. If you have more than that in your bank account at any given time, you will still be covered, but you'll have to divide your money into subaccounts of less than $250,000 each.
If you have any questions, you can get a free consultation with the Best Attorneys in Utah.
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