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Unlike investments, money in a a savings account should be insured. Do banks often invest much of their money in the stock market, though? I am not sure about that, but if that were true and the stock market theoretically crashed would the government be able to pay people their money? Sorry if this sounds like a dumb question.
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Banks loan out a lot more money then they have. I forgot the exact proportion, but let's say it's 1/10, which means that for every $1 they receive in deposits, they lend $10. So if all people decided to withdraw their money on the same day, the bank wouldn't be able to give them their money back. FDIC insurance protects your deposits in the event the bank won't be able to give you your money back, in which case the money will be paid by the government. -
There are stiff regulations on how much a bank can lend vs. what it has to hold in reserves, and it's a number the Reserve can adjust (to increase/decrease the money supply).Originally posted by safari View Post
Even if a bank weren't invested in the stock market, FDIC insurance will work, but it may take a LONG time to actually be paid. So it's wise to spread your eggs around a little bit among banks IMO.Comment
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great link, poundwise!!!
for more details on failures from this page, select 'Failed Bank Information' and then the 3rd option is 'Historical Statistics on Banking - Bank and Thrift Failure Reports'.
according to this, 3537 banks failed between 1934 and 2006. 2386 of those (or 67.46%) were during the 80s (1981-1990). only 47 (1.33%) failed from '96 to '06...Comment
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