Market Insider

Jun 6, 2023

The debt ceiling drama of the last month has drawn our attention away from another matter that has the potential to affect each and every one of us: the safety and soundness of our banks, and most importantly, our money in our banks. Trust in the soundness of our banking system is a cornerstone of the economy. And when that trust is shaken, the economy is threatened. And when the economy is threatened, the well-being of our families is put at risk.

Most of the time we take all of this for granted, but every now and then, events focus our attention. One of these events came over the course of five days in mid-March when, without any apparent warning, three mid-sized banks collapsed, two of them in spectacular fashion.

This brought back fears of a repeat of the 2008 financial crisis, when a series of banks toppled other banks like dominoes and brought down the world economy. What happened back in March has been called a bank run. Before this year, the last big one occurred in 2008, when Washington Mutual lost deposits of 16.7 billion over ten days before it was shut down by the Feds.

What happened this year was something entirely different. In one day, one bank experienced withdrawals of $42 billion. The feds closed that bank the next day. They closed another bank two days later. Other banks had to be closed or rescued too. So that raises a very big question, doesn't it? Should you be worried about the safety of the money in your bank?

Is your bank insured by the FDIC? If yes, great. If no, I'd move my money. The FDIC is a U.S. government agency that oversees banks and other financial institutions, and insures deposits of individuals and businesses that are held by those institutions. It allows people like you and me to sleep easier at night, knowing that even if our bank were to collapse tonight, we would wake up and still have access to every penny of our money in the morning.

That's exactly what happened to those banks that collapsed last March. Every one of those depositors received every penny in their accounts, tens of billions of dollars, the next business day after those banks were shuttered. It was a remarkable achievement by the FDIC that left tens of thousands of families and businesses breathing easier.

Is the amount in your account below the FDIC's insurance limit? Well, it's a little complicated to determine that. My advice is simply to talk to your financial advisor, to talk to your banker. But basically, the short answer you'll usually hear is that the limit is $250,000 per depositor, per bank.

I'll close with this. I sleep soundly knowing my bank deposits are insured by the FDIC. It's the same reason I sleep sadly, knowing my wealth is protected by gold. For me, gold is a form of wealth insurance. That when hard times come as they always adventurously do, I can count on gold to offset losses in other asset classes in my portfolio. It is happened time and time again. Thanks for joining me.


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