This post was originally published October 29th, 2007. I’m bumping it up because in today’s financial climate it is extremely important. If you have any experience in dealing with getting money back from FDIC, please read the comments. Several people are having problems getting their money. Any advice you can give would help them out.
Recently NetBank was shut down by the FDIC. The FDIC was created to prevent runs on the bank. They insure your accounts so even if the bank goes under, you will get your money back out. In exchange the bank gives up some control. The FDIC can come in, inspect things and force the bank to sell out to another financial institution if the FDIC doesn’t feel the bank is managing things correctly.
That is what happened with NetBank. Most of the savings/checking accounts were sold to ING Direct (the Orange savings account people). For most people this simply means that people were unable to access their accounts for a few days. FDIC insurance covered everything up to the $100,000 (or $250,000 for IRAs) limits. However, the people who are in trouble are the ones who had money over the limits. The FDIC will distribute anything that is left of the assets to these people, but it looks like they will only get about 50% of the amounts they had over the limits.
The $100,000 limit is per depositor per institution, so you can get another $100,000 in insurance by moving any money in excess of the limit to another bank. $100,000 may seem like a lot of money, but if you have a consistent saving strategy to plan for retirement and emergencies you are probably going to exceed the limit at some point in your life. It is important to plan ahead so you don’t accidentally end up losing a bunch of money because of a bank failure.
If you have a business this is especially important, because it is very common to have a balance of over $100,000 just to maintain adequate cash on hand for meeting payroll and paying operating bills.
It is also wise to keep an eye on your bank’s financial status. If it is a publicly traded company, keeping an eye on the stock price should give you an idea of how the bank is doing as will the financial statements and SEC filings. A private bank may be a little more difficult to track, but you can generally get an idea based on their press releases.
Update: More recently the FDIC shut down another bank called IndyMac also known as IMB or Indy Mac Bank. On Friday the FDIC seized all of the bank’s assets and took control of running IndyMac. They were open again on Monday, but this time under the government’s control. The bank is now known as Indy Mac Federal Bank.
One of the interesting side effects of this is that the bank stopped foreclosing on homeowners who were in default. This probably won’t last forever, but the government is looking for ways to keep people in their houses if at all possible.
For the approximately 10,000 people with money at IndyMac that wasn’t insured, they are being allowed to withdraw up to 50% of their money. It is possible that they may get more in the future. People who are under the insured limit of $100,000 are able get their FDIC insured funds out immediately. There have been long lines, but people are getting their money out. If you have money at IndyMac, it might make more sense to do a direct transfer to another bank instead of going down, waiting in line and trying to get the money out in cash.
Many people end up here looking for an FDIC “watch list” or FDIC “trouble list”. The FDIC never releases its information about banks to the public. They especially don’t publish a list of troubled banks. This is part of their policy. The role of FDIC is to provide insurance–not rank banks. However, they do suggest a number of third party rating services that can provide information about the financial condition of banks. Most of these charge a fee. Most of these ratings take the following into account:
- Capital
- Asset Quality
- Management
- Earnings
- Liquidity
- Sensitivity to Markerts
Update 2: Toward the end of July Federal regulators shut down two more banks. First National Bank of Nevada and First Heritage Bank of Newpart Beach, CA. The accounts were sold to Mutual of Omaha so it appears that no one lost any money. The transaction ended up costing FDIC under $1 billion.
Update 3: In August the FDIC shutdown First Priority Bank in Florida. Most of the assets were purchased by SunTrust Bank. Currently it is estimated that there is about $13 million in uninsured accounts–this is money that depositors will probably only get a fraction of as the bank shuts down.
If you had money at IndyMac, First Priority, or another failed bank, please leave a comment to let everyone know if you were able to get your funds out of the bank and particularly how the process worked.
Dear sir:
I had 2 Cd’s at net bank when they closed. One matured September 21st the day FDIC closed them. I had two Cd’s for $100,000 each, one titled POD to my wife. We immediately tried to get our principal back from Net bank. We could not due so as the FDIC had control of the funds. Eventually we were able to get back Roughly $150,000 of the money. We have not been able to get back the other $50,000 no mater how hard we try. The money fell under the FDIC insured amount. We have been going back and forth between Ing and the FDIC for roughly a month and a half with both the FDIC and Ing saying that the other entity has control of the money. They both deny having control of the money and we get no where with either of them. They just say wait another week. I have waited and nothing happens. One of the agencies has stolen my money and is not about to let it go. I am at my wits end here. neither outfit will return calls. Where else can I go to to get back my money. I need legal assistance here. Someone here is a thief and there is nothing I can do about it. HELP!
Thanks Bill
Why was my earlier comment, concern not posted. I have not been able to get my money back from Net Bank ING or FDIC. What are you people hideing? Bill
I am involved in the Net bank Closure. I have not been able to recoup my money and ING Net Bank and The FDIC have Been of no assistance. What are my options?
@Bill – No conspiracy here. I was on the road and your comments were flagged for moderation. I don’t know what to tell you, but you might consider contacting the government to see if they can offer some suggestions of how to go about recovering your funds.
The money you don’t get back immediately from the FDIC is an obligation of Netbank. Once things are finalized, you can file and get some more of it back from Netbank.
I am a victim of the indymac bank failure. I had a $200,000 6 month CD. It was brokered through Sun Cities Financial Group in Henderson, NV with their assurance that I was fully covered by FDIC, because my sister was listed on the account too. FDIC now informs me I am only covered for $150,000. Now who do I go after? FDIC? Indymac Bank? Sun Cities who so far is denying responsibility.
@Don – I don’t know what to tell you. My understanding is that FDIC will only pay $100,000 for an account or group of accounts owned by the same person so I would expect that you would either be covered for $100,000 or $200,000 ($100,000 per person). The $150,000 seems odd.
I think I would start with Sun Cities Financial Group if they were the ones who told you that you would have FDIC coverage for the full amount.
Does anyone else have any suggestions?
I have also kept money in CDs. Now I have learned a lesson for a lifetime. I live in Washington, D.C., and in the Post this past weekend I saw only one ad advertising CDs. It was COUNTRYWIDE bank offering a 4.15% CD. Now I recall this name being mentioned in the news because of its high foreclosure rate in the spring and now I found out from a cousin that IndyMac was offering the highest rate for CDs in CA so now I figured out and since read that banks in trouble will try to attract deposits by offering these too good to be true CD rates. I know at my local bank the CD’s are being offered at 3.5% for 13 months, which is 13 months too long. Thus, I opted not to go for it. So if you’re going to get a CD, go for banks with lower or average CD rates. Nothing that is too good to be true.
Will all the chaos and suspicion I have about banks, I don’t know where to put my money, but I have always known that banks cover less than $100K so I have spread my money between 3 banks, and I never had 100K!
I am an Indymac victim also who has lost money. Currently they have passed this 250,000 limit increase for FDIC insurance. Is there any chance that this can have a retro effect and help people like me?
Also, how likely do you think Indymac assets are going to cover the money we have lost? I cannot find any information anywhere about how the current situation is with Indymac and FDIC. FDIC has paid 50% of uninsured amount to people who have lost money, do you know when the Indymac assets are sold whether FDIC will get reimbursed first before paying us?
thanks
I sold my house in June of this year. I deposited $360,000 into Indymac. The branch manager told me the money was fully insured and accessible while my check was on hold. Two weeks later, I’m out $130,000 and the branch manager told me I shouldn’t have been so stupid. Why is the government bailing out all of the irresponsible people who took out loans they couldn’t afford. How about the responsible people who had bad luck with Indymac. I’d like my money back or atleast some help because I can’t even afford to buy another home.
I am another IndyMac investor with uninsured funds. I have written m congressmen about the possibility of making the increase to 250k for FDIC insurance retroactive to IndyMac depositors, but have not had a response.
I have read that the amount of uninsured funds is much less than first anticipated. I would like to hear from other investors.
I, too am upset that the govt is bailing out those who borrowed more than they could pay back…Our funds are POST TAX and most of all…they are ours…not borrowed
I too lost $24,500 which was the amount over and above what Indy Mac Fed was covering. I was told that when the bank is sold I could recover some of this amount. However, there is no information covering the status of the bank. I was told by the bank manager that there were perhaps 60 interested parties desiring to consider buying the bank before the Feds took over. I am now informed by the branch manager that the list to buy Indy Mac Fed was around 20+ but has been narrowed down to 6. Does anyone have information as to what is going on and how are the Feds progressing? They have been guilty of underestimating the value of a bank as it relates to a potential sale.
I lost a few dollars when Indy Mac was taken over, Now that a sale is at hand, why has not the conditions of the sale addressed the $300M lost by individuals who had invested in the bank. Are the future buyers of the bank going to get federal bailout money and if so why should they not be forced to cover the $300M lost by account holders. If they want to lure these same people back, this would go a long ways to instilling confidence in the bank.
Has anyone learned what/if the new owners of Indy Mac have any plans to reduce the $277M lost by account holders when they were taken over?