The Silicon Valley bank collapsed last month, the second largest bank failure in US history, after Washington Mutual in Seattle in 2008. In one day, panicked depositors withdrew $42 billion from their accounts after social media posts questioned the bank’s stability when He was planning to sell the shares to raise cash. The bank held long-term treasury bonds that were losing value as interest rates rose, so it was difficult to sell them to obtain the liquidity needed for day-to-day operations.

When a second bank failed a few days later, the federal government stepped in to guarantee all deposits in both banks. They wanted to prevent a run on other banks, which could lead to a nationwide financial crisis. They also knew that these banks held payroll accounts for many companies, and if they closed, it would take some time for the workers to receive their paychecks.

After our financial crisis in 2008, Congress passed the Dodd-Frank bill to regulate banks more closely. In 2018, Congress and President Trump relaxed these restrictions. Many economists and politicians are calling for the regulations to be reinstated.

One term keeps popping up in all of these discussions – FDIC. The Federal Deposit Insurance Corporation (FDIC) was founded during the Great Depression. Banking streams were popular in the 1930’s. The FDIC guarantees that your bank deposits are safe, even if the bank is damaged. Premiums for this insurance are paid by banks, and it protects up to $250,000 in an individual account, and $250,000 for each person’s share in a joint account.

FDIC insurance covers money in checking, savings, money market, and certificates of deposit (CDs) accounts. The FDIC also guarantees official items issued by a bank, such as cashier’s checks, money orders, and specialized accounts such as IRAs. It doesn’t protect things like insurance policies or stocks, even if you bought those at a bank. All banks in Box Butte County are FDIC insured.

Not all of us manage our money through banks. Box Butte County has four credit unions. Is our money safe in it? Deposits at these four credit unions are covered by NCUA, the National Credit Union Administration. Like the FDIC, it protects up to $250,000 per credit union member via the National Credit Union Equity Insurance Fund. It also includes checking and savings accounts, money market deposits, certificates of deposit, cashier’s checks and money orders.

If your financial institution fails, how do you get your money back? You don’t have to do anything. The FDIC or NCUA will contact you with information on how to return your money. Historically, the FDIC and NCUA insurance programs covered losses within a few days after a bank or credit union closed. The FDIC website says they typically pay the next business day, either by 1) providing each depositor with a new account at another insured bank for an amount equal to the insured balance of their account in the failed bank, or 2) issuing a check to each depositor for the insured balance of their account in the failed bank .

Should you keep your money in a bank or credit union? definitely! Keeping cash in your home puts you at risk of theft, fire, flood, loss or damage. Opening an account with an FDIC-insured bank or NCUA credit union anywhere ensures that your money is protected in the event of disaster. You do not need to apply for this insurance; Coverage is automatic.

One of the problems we face today is that people are too willing to believe what they read on social media. A Silicon Valley bank collapsed over a Twitter post. With FDIC and NCUA insurance, in the unlikely event of a financial institution’s failure, your money is safe.

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