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Banking Crisis Questions & Answers

Is my money safe in the bank?

VIDEO: Sheila Blair, FDIC chair, Answers This Question

Sheila Blair, Federal Deposit Insurance Corporation's (FDIC) chairwoman says the nation's banking system is "absolutely safe" and Americans' insured deposits in banks are protected. "The banking system as a whole is absolutely safe." The FDIC insures bank deposits of up to $100,000 and up to $250,000 for funds in retirement accounts such as an IRA.

Bair said that while there will likely be more bank closings - like that of IndyMac Bank, which last week became the largest regulated thrift to fail - they won't occur on a large scale and should be put in "appropriate context."

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Who is the FDIC:

http://www.fdic.gov/about/learn/symbol/index.html

The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $100,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.

An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.

The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $49 billion, the FDIC insures more than $3 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.

Savings, checking and other deposit accounts, when combined, are generally insured to $100,000 per depositor in each bank or thrift the FDIC insures. Deposits held in different categories of ownership – such as single or joint accounts – may be separately insured. Also, the FDIC generally provides separate coverage for retirement accounts, such as individual retirement accounts (IRAs) and Keoghs, insured up to $250,000. The FDIC's Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts.

List of failed banks:
http://www.fdic.gov/bank/individual/failed/banklist.html

Source: FDIC http://www.fdic.gov/


What is IndyMac?

Federal regulators seized assets of the IndyMac Bancorp Inc. on Friday, July 11. According to regulators, the mortgage lender, which succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures, is the largest regulated thrift to fail and the second-largest financial institution to close in U.S. history.

Fannie Mae Defined:

Fannie Mae is a financial services company on the New York Stock Exchange (FNM/NYSE) serving the American home mortgage industry. Fannie Mae offers banks and other mortgage lenders financing, credit guarantees, technology and services so lenders can make more home loans to more consumers.

Source: Fannie Mae http://www.fanniemae.com/


Freddie Mac Defined:

Freddie Mac is a stockholder – owned corporation chartered by Congress to increase the supply of funds that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers and multifamily investors.

Source: Freddie Mac http://www.freddiemac.com/

NOTE: The Federal Reserve Chairman Ben Bernanke told Congress Tuesday the fragile economy is facing "numerous difficulties" including persistent strains in financial markets, rising joblessness and housing problems - despite the Fed's aggressive interest rate reductions and other fortifying steps.

The Fed and the Treasury Department came to the rescue of mortgage giants Fannie Mae and Freddie Mac, offering to throw them a financial lifeline. The companies hold or guarantee more than $5 trillion in mortgages - almost half of the nation's total. The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and to let the government buy their stock. The Fed has offered to let the companies draw emergency loans.

(© 2008 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)