Wednesday, July 16, 2008

Setting myself straight: The FDIC can't get you the principal either

Yesterday I casually dismissed concern that the FDIC wouldn't get you bank account money insured by law. Worry about inflation, not the principal, I said. But it looks like there's bad news in the IndyMac run, and some people might not even get that. Long lines formed, the kind we haven't seen in a long time (sue me if I don't know if this happened in the 80s. It sure happened in the 30s!)

Some choice quotes to get you quaking:

Noelle Gabay of Northridge, a budget analyst for the state of California, said FDIC officials acknowledged that she was owed $213,500 but provided her access only to $99,000.

"My trust in the FDIC is gone," said Gabay, 49. "The question is now, where do we put our money? Do we buy a bigger mattress?"


Todd Bash, ...had two certificates of deposit, a savings account and a checking account, totaling more than $180,000 ... when he finally talked to a teller, she showed him that more than $80,000 was missing from one account. Why? The teller didn't know. She referred him to an FDIC official in the branch, who also couldn't tell him what happened, he said.

"One person finally suggested that maybe there was a hold on my account, but when I asked if it was a hold, why wouldn't they just say there was a hold? . . . Nobody could give me any answers," he said.

Well, I certainly know the horrors of having to navigate a bureaucracy, and throwing all your trust into something that's been pretty reliable, only to have it blow up in your face. Luckily, it's never been about money in these amounts!

This really needs to be getting more attention: for the FDIC not to honor these insured values, means everyone's FDIC-insured account is at risk. To steal from MLK: insurer nonpayment anywhere, is a threat to its insureds everywhere. My Google-fu isn't that great, but have a look for yourself. Where are the bloggers on this one?

These folks may still actually get their money, since these incidents may just be delays, as happened in the S&L crisis. We can only hope at this point.

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