by Chana Joffe-Walt

After our interview with FDIC's John Bovenzi, a listener asks:

When a bank is taken over by the FDIC, what happens to the deposits that exceed the insured amounts? Are they just considered gone, or are they used to cover the debts of the bank being taken over?

Great question. The simple answer is that after $250 thousand, there are no guarantees. It's not bloody likely you'll ever see that money again.

Here's the longer answer:

 

After a bank fails, the FDIC usually spends months selling off the remaining assets. That means everything from loans to office chairs, often for a lot less than the bank had said it was all worth.

The proceeds first go toward paying insured depositors — up to that limit of $250,000. If there's anything over (usually there isn't), it gets divided equally between the FDIC insurance fund and depositors who were over the limit. In those cases, depositors often get something like 50 cents on the dollar.

So, there's a chance you'll get some of your uninsured money back. There's even a chance you'll get all your uninsured money. But in reality, that money is probably gone.