'Is My Money Safe In A Bank?'
SCOTT SIMON, host:
All the tough economic news about foreclosures and collapses have inspired a lot of Americans to finally read the fine print at the bottom of their banking statements to find out what they've been promised or what they have to watch out for. Gail MarksJarvis writes a personal finance blog for the Chicago Tribune. She's been fielding an awful lot of basic banking questions this week. Miss MarksJarvis joins us from member station WBEZ in Chicago. Thanks very much for being with us, Gail.
Ms. GAIL MARKSJARVIS (Personal Finance Columnist, Chicago Tribune): It's great to be here.
SIMON: We've seen images this week of IndyMac customers waiting in lines to withdraw funds under police supervision. Inevitably, those images stir up the kind of sepia-toned photographs we've all seen at the Depression. Are banks the safest place for your money right now?
Ms. MARKSJARVIS: Banks are still a safe place for your money, as long as you pay attention to following the rules so that you have the insurance that the FDIC provides. Even if the bank goes under, your money is just fine.
SIMON: Well, up to a certain limit, though, right?
Ms. MARKSJARVIS: That's correct. So if you're an individual, your money is protected up to 100,000 dollars.
SIMON: Is that 100,000 dollars per family, per person - what is it?
Ms. MARKSJARVIS: It's 100,000 dollars per individual. Now, if there's a couple and they have a joint account, then they're covered to 200,000. Or say, for example, you're an individual and you have your child on the account with you. Again, you're covered to 200,000. And if you had an IRA, that would be covered to 250,000.
SIMON: What does someone like Donald Trump do? Keep 100,000 dollars in 50,000 banks?
Ms. MARKSJARVIS: Well, that's what you can do. You can have multiple banks. But frankly, most of us shouldn't have hundreds of thousands sitting around in a bank because when I'm talking about the insurance, I'm talking about savings accounts, checking accounts, CDs. Most of us need more diversified investments than that. Incidentally, if you have money in a bank and it's in mutual funds, those are not insured.
SIMON: Oh, that's important for people to hear.
Ms. MARKSJARVIS: That's right. In a bank, it's the traditional banking services that are insured, the checking account, the savings account, the CDs.
SIMON: What about if you have your money in a foreign bank?
Ms. MARKSJARVIS: A number of countries throughout the world - and you can actually get the list on the FDIC site - many of those countries have very similar rules to the FDIC. So again, it may not be 100,000 dollars protected by insurance. You should double-check. But the chances are that if you're in a developed country, your money is probably protected.
SIMON: Some banks are riskier than the others, though, aren't they?
Ms. MARKSJARVIS: Yes. Right now a number of banks are under pressure because they're so exposed to mortgages. And one way you can tell is if a bank is offering a higher interest rate on CDs or savings accounts than the bank down the road. The reason they do that - and IndyMac Bank was one of those banks. They were doing it because they desperately needed deposits because they were having some financial trouble.
SIMON: Can the FDIC afford to handle more bank failures? It's got a limit at some point, doesn't it?
Ms. MARKSJARVIS: That's one of the questions I'm being asked most often. The FDIC so far says that they're very capable of handling what they think is on the horizon right now. They have a list of 90 banks that they are watching because they think there's some level of insecurity there. They do not make that list public.
And the reason, when you think about it, it makes sense. If they did make it public, we'd all get nervous and we'd go down and we'd pull our money out and there'd be a run on the bank, and that would actually cause failures. But the FDIC has about 53 billion dollars that can go to covering these factors. And let's just say it got really bad. The government steps in and backs it up. They can sell bonds or in the worst-case scenario, they could raise taxes to cover it.
SIMON: Gail MarksJarvis writes the blog, "On Money," for the Chicago Tribune. Gail, thanks so much.
Ms. MARKSJARVIS: Thank you.