Bank Failures (Public Service Announcement)

[Nate tha\\\' Great]

For those of you that don't know, a medium-sized Internet bank called NetBank has been shut down by the FDIC and forced into bankruptcy. There will likely be other banks that follow as a result of problems in the credit and mortgage sphere.

http://www.ajc.com/business/content/busi...age_tab_newstab

The FDIC insures up to $100,000 in deposits at any one institution. Any amounts above the $100,000 are subject to the risk of bank failures. Specifically, if the bank fails, you become one of its creditors, and have to wait for asset sales during the bankruptcy process to get the rest of your money back. And of course, you may never get that money back at all; most banks are not able to cover the full amount of uninsured deposits once they fail.

I'm sure that some of you guys have quite a bit of money in various sorts of online checking and savings accounts. The rule of thumb is very simple: never have more than $100,000 deposited at any institution you do not trust absolutely and 100% to the fullest. If you have more than $100,000 and want to deposit money at smaller banks because of their superior interest rates, you should split your money up between several such institutions, never with more than $100,000 in any one place at any given time. Large banks like Chase or Wells Fargo or HSBC are probably completely safe, but there are the smaller guys you should be doing a little due diligence on at this point in time.