Posted on 11/14/2009 8:19:28 AM PST by null and void
If your bank account pays interest on your checking ("transaction") account, under the NEW TEMPORARY LAWS ("FDIC Transaction Guarantee Program"), the FDIC IS NOT covering your account if your bank fails. This refers to a REGULAR CHECKING ACCOUNT, not a money market account; however, if you have a N.O.W. checking account (Negotiable Order of Withdrawal), and if the interest rate does not exceed .50%, then your account is covered under FDIC. (So if your bank increases the interest rate above .50%, your account is no longer covered.)
There's much more....like if you have a savings account that is linked to an interest-bearing checking account, it appears that the savings account could also be in jeopardy if there is sweeping involved. (B of A's Promotion of rounding off dollars and sending the balance to your savings account is ONE form of sweeping.)
There's more, e.g., attorneys petitioned to get their transaction checking accounts (kinda like a legal escrow accounts ) covered by the FDIC ----the FDIC agreed and this is the the only exception.
The most important thing to know....DO NOT HAVE A CHECKING ACCOUNT THAT PAYS INTEREST.
Read the sign posted in your bank lobby. It states specifically that FDIC covers NON-INTEREST checking accounts. This is a very slick bait & switch. The attorneys aren't stupid. They saw what the FDIC was doing and so they petitioned and got an exception.
I became suspicious when B of A & Fifth Third started giving interest on their standard checking accounts. I knew they weren't being generous for nothing. A friend of mine confirmed that this happened to him also. He couldn't figure out why they started giving pennies away.
I can explain about the dates also....but they're really irrelevant because if a bank fails, the New Temporary FDIC laws are in effect----for some banks until 12/31/09 and for other banks through mid June 2010.
Right now, the FDIC can cover bank failures, but if a huge bank fails, that's a different story.
But I got it via e-mail, so it must be true...
(Seriously, can anyone confirm or deny?)
*******************UNVERIFIED*****************
Sounds like B.S. to me.
But just in case, I’d shift your money to Nigeria, where a helpful barrister who types in ALL CAPS is ready to deliver a much larger sum in return.
I can confirm it, but I would have to shoot myself.
Me too, but these days, how can you be sure of anything the government does?
Not true.
But check with a couple of banks to check. They would have disclosures to give that would verify.
Call your own bank. I did and they said they did not know anything about it and would call me if anything changed.
Been in banking 25+ years and never heard of such thing. Accounts are insured by ownership of accounts and if the law has changed my bank would be out of compliance and frantically getting new brochures written. Of course, who knows what might be tucked away in some bill winding its way to a vote?
I would guess this is how bank runs are made.
Certainly not the people we trust to vote on them.
Part of it. Which is why I clearly labeled it as “unverified”.
IF it is true we need to know to shift accounts to covered types.
IF.
"..PremierWest Bank is participating in the FDIC's Transaction Account Guarantee Program. Under that program, through December 31, 2009, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the Transaction Account Guarantee Program is in addition to and separate from coverage available under the FDIC's general deposit insurance rules.
On October 14, 2008, the FDIC announced its temporary Transaction Account Guarantee Program, which provides full coverage for noninterest-bearing transaction deposit accounts at FDIC-insured institutions that agree to participate in the program. The transaction account guarantee applies to all personal and business checking deposit accounts that do not earn interest at participating institutions. This unlimited insurance coverage is temporary and will remain in effect for participating institutions through December 31, 2009. For more information visit: .."
This banks website is saying the FDIC will cover ALL the money in a non interest bearing checking account, not just the $250,000 limit. This is in addition to the regular FDIC insurance. Currently the program will last till June 30, 2010.
For more information from the FDIC, call toll free 1-877-ASK-FDIC.
Some idiot has confused the program that provides unlimited protection on certain accounts at certain banks with the FDIC insurance program.
The transaction guarantee program was intended to cover certain large accounts, such as corporate payroll accounts. You trade off interest for full protection. (I think they can pay up to a half a percent interest on those accounts, but verify that).
But, it summary, whoever wrote the original email is an idiot.
There seems to be 2 different types of FDIC insurance that are in play right now - the “traditional” insurance & then some type of temporary insurance called the Transaction Account Guarantee Program. I think what’s happening is that the temporary insurance is ending as of the end of the year (at least for some banks). But PLEASE don’t take my word for this - this is just what I’m assuming based on the notices I’ve been reading. Citibank, for instance, has a new note on their website which seems to explain it pretty well - part of the note is below. Your best bet is to ask your bank directly.
“Citibank Checking Accounts will have full FDIC Coverage. Citibank is participating in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2009, all non-interest and interest-bearing Citibank checking accounts are fully guaranteed by the FDIC for the entire amount in the account.
Note: Beginning January 1, 2010, Citibank will no longer participate in the FDIC’s Transaction Account Guarantee Program. Thus, after December 31, 2009, funds held in noninterest-bearing transaction accounts (non-interest and interest-bearing checking accounts) will no longer be guaranteed in full under the Transaction Account Guarantee Program, but will be insured up to $250,000 under the FDIC’s general deposit insurance rules.”
I think you've explained what is actually going on, as well as how that could easily be interpreted the way the e-mail's author did.
Little cause for alarm, unless one routinely keeps over $250,000.00 in checking.
I'm in no danger!
FReepers are AWSOME! Thanks again...
Of course, it raises the more interesting question as to where one can get more that a half a percent on a checking account these days....
As I unerstand it, interest bearing accounts up to $ 250k are insured. Non-Interest bearing accounts are insured regardless of amount.
This happened last year during the bank meltdown and other nations like the Saudis and Germans fully insured accounts and the FDIC didn’t want American banks being crippled if investors / corporations pulled their cash to go overseas where funds were 100% insured.
Since banks pay almost nothing now, it’s a no brainer for a large depositor to pull your cash out of CDs, MMAs and simple savings into non-interest bearing accounts for the 100% guarantee.
I don’t know if it’s permanent or not. I don’t think it will be, but have not read legislation to repeal the current situation.
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