Are Bank Deposits Really Guaranteed by FDIC Insurance?
Bank deposits up to 250,000 are guaranteed by FDIC insurance; at least that's what we're told. Is that really true?
FDIC insurance consists of a fund set aside for the purposes of making depositors whole in the event of a bank failure. Banks pay into this fund. However, there's simply not enough money in the fund to do the job - and that's no secret.
Should we be concerned? Apparently not. It seems that deposits up to $250,000 are backed up by the "full faith and credit" of the federal government. The key phrase here, though is "it seems." As you'll see in this Wall Street Journal Opinion, "it seems" that there is no law or regulation or legislative decision that backs up this claim:
If you do read the article, see if you get the sense that I did that a level of deception is at work here. I'm not saying the government didn't mandate the signs we see today to reassure people; but if they wanted to back up the deposits, why not just state that clearly in some law or regulation? Why this sort of mealy-mouthed language?:
OK, so you probably figure that the government will just back up the deposits like the sign says, right? Well, if they do, it's coming out of the taxpayers pocked, not the FDIC insurance fund, unless it's a pretty small bank - and only maybe one or two of those - that fail, since there's not a lot of money in that fund. And maybe you knew that already. But what you may not have thought about is that maybe - just maybe - those deposits that aren't "really" backed by the full faith and credit of the government will simply not be fully backed up by that full faith and credit.
Click HERE for the article.
FDIC insurance consists of a fund set aside for the purposes of making depositors whole in the event of a bank failure. Banks pay into this fund. However, there's simply not enough money in the fund to do the job - and that's no secret.
Should we be concerned? Apparently not. It seems that deposits up to $250,000 are backed up by the "full faith and credit" of the federal government. The key phrase here, though is "it seems." As you'll see in this Wall Street Journal Opinion, "it seems" that there is no law or regulation or legislative decision that backs up this claim:
Congress apparently has never enacted a provision in a law simply stating that insured deposits are guaranteed by the full faith and credit of the government.I found this startling. The article is worth a read. What surprised me was reading that the government insisted that all banks display the "full faith and credit" signs that you see at banks today, without bothering to actually make the legal commitment. Notice I said "surprised." A few years back I might have said "shocked" but frankly virtually nothing shocks me anymore when it come to the mess that's been created by Wall Street and the federal government. So "surprise" will have to do.
If you do read the article, see if you get the sense that I did that a level of deception is at work here. I'm not saying the government didn't mandate the signs we see today to reassure people; but if they wanted to back up the deposits, why not just state that clearly in some law or regulation? Why this sort of mealy-mouthed language?:
"...it is the sense of the Congress that it should reaffirm that deposits up to the statutorily prescribed amount in federally insured depository institutions are backed by the full faith and credit of the United States.""It is the sense of the Congress"? That's not the clear and direct statement you'd expect, is it? Doesn't it seem like it leaves "wiggle room" to back off what really does read like a promise?
OK, so you probably figure that the government will just back up the deposits like the sign says, right? Well, if they do, it's coming out of the taxpayers pocked, not the FDIC insurance fund, unless it's a pretty small bank - and only maybe one or two of those - that fail, since there's not a lot of money in that fund. And maybe you knew that already. But what you may not have thought about is that maybe - just maybe - those deposits that aren't "really" backed by the full faith and credit of the government will simply not be fully backed up by that full faith and credit.
Click HERE for the article.
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