FDIC Chief Seeks To Reassure Consumers

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Many Americans are worried their bank will be the next to fail. Sheila Bair, chairman of the Federal Deposit Insurance Corporation, says all deposits up to $100,000 are safe and individual IndyMac customers will get the bulk of their uninsured deposits.

MICHELE NORRIS, host:

The run on the bank, that image is a powerful one. Today, President Bush reached for a memory of his own as he tried to reassure bank customers.

President GEORGE W. BUSH: I happened to witness the bank run in Midland, Texas at the time. I'll never forget the guy standing in the bank lobby saying, Your deposits are good. We've got you insured. You don't have to worry about it if you've got less than $100,000 in the bank. The problem was, people didn't hear.

ROBERT SIEGEL, host:

And it's been much the same this week outside of IndyMac. As we've mentioned, many people have been lining up outside that bank's branches to withdraw their savings. They walked away with most of their money because IndyMac was insured by the FDIC.

NORRIS: The Federal Deposit Insurance Corporation was started in 1933, after the collapse of thousands of banks. I spoke earlier today with the chairman of the FDIC, Sheila Bair. She insists that Americans should not worry about the fate of their deposits.

Ms. SHEILA BAIR (Federal Deposit Insurance Corporation): Their insured deposits are absolutely safe. We've been in existence for 75 years. We're actually celebrating our 75th anniversary this year, and no insured depositor has ever lost a penny of insured deposits. We have a very strong track record on that, which will continue.

NORRIS: Their insured deposits. That's up to a specific amount.

Ms. BAIR: Right. The general rule, as you've indicated, is $100,000 per institution. You can get an additional $250,000 in an IRA account. It's also possible to get a lot more than that basic 100,000, depending on how your accounts are structured. For instance, if you have an account in your name alone, you get $100,000 coverage for that. If you have a joint account with your spouse, you would get another $100,000 for that, and the same would be for your spouse too. So that would be a total of $400,000 in coverage right there.

It's also possible with a revocable trust to get $100,000 per beneficiary. So I do think it's important for those who have more than $100,000, if your accounts are appropriately structured, you would still probably be below the insured deposit limits, but if you have any questions, just please call us or go talk to your bank and make sure.

NORRIS: So people who have up to $100,000 in a regular account, with the exception of retirement accounts and a few other exceptions, that money is insured. What happens beyond that point? What happens to the roughly 10,000 people at IndyMac who had deposits in excess of $100,000?

Ms. BAIR: The FDIC board has already approved an immediate dividend of 50 percent, so they will right now have access to all their insured money plus an additional 50 percent of their uninsured, and we are going to move, try to move, in a very timely way to sell this institution, take it back into the private market, and then when we get the proceeds from that sale, we will be in a position to make additional payments, additional dividend payments to uninsured depositors.

They may well still take some loss. Historically, generally, an uninsured depositor on the uninsured portion of their funds will take a loss of 10, 15, sometimes 20 percent, but it's still - most of that money the uninsured will get back, and certainly all of the insured is completely safe, and most of the uninsured they will get back as well.

NORRIS: With so many banks showing weakness from the housing crisis, could we see the kind of collapses that we saw during the late '80s and early '90s that kept the FDIC so busy during the savings and loan crisis?

Ms. BAIR: And I'm glad you brought that up because I think, you know, comparing those days to today really helps put things in context. We've had five bank failures this year. There were over 2,000 during the S&L debacle. I think it peaked in 1987. We closed 534 banks.

So you know, the five banks that we've closed, really it's so small in comparison to what was going on then.

NORRIS: But looking back to the savings and loan crisis, as you noted, there was a torrent of bank closures in that period, but it began with a trickle.

Ms. BAIR: Well, that is true, and it progressed over a multi-year period, and so I would not make predictions. My personal view is based on the information we have now. There are still - even the more dire predictions are not approaching anywhere what we saw during the S&L days. So I don't make predictions, but I would observe that even the private analysts that have some of the more alarming projections are more - you know, I think I saw one, 300 over three years. Again, that's nothing compared to what we were doing. I'm not saying that would happen. I'm not sure. I would be surprised, frankly, but that's nothing compared to what we were seeing during the S&L days.

NORRIS: Sheila Bair is chairman of the FDIC or the Federal Deposit Insurance Corporation. Thank you so much for speaking with us.

Ms. BAIR: You are so welcome. Thank you.

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