Does the FDIC Have 99 Years to Pay Insured Deposits?

In these uncertain times, many are questioning the safety of their money in the banking system and question whether or not the Federal Deposit Insurance Corporation can provide adequate protection to consumers of failed banks.

The FDIC is hoping to dissuade consumers from these fears and assure consumers of their safety. They’ve posted a list of 10 misconceptions about the FDIC in hopes of educating consumers about the protections that they do and don’t offer.

One of the most prevailing rumors is that the FDIC is only obligated to pay off 7% of the value of anyone’s deposits and that it has 99 years to pay off the balance. The FDIC says that this is false, and to date they have paid all insurance claims within a period of a week. The FDIC has stated that this is a common tool used by salespersons of investment and insurance products to steer them away from products that are FDIC insured.

According to the article, “Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.”

With the 84 bank failures this year, the FDIC has made arrangements for every customer at each bank in a very short period of time. The real question is what will happen when the FDIC’s deposit insurance fund drops to zero and there’s no money left to pay consumers.

According to the FDIC’s charter, its backed by the full faith and credit of the Federal Government, so if the FDIC runs out of money, the U.S. Treasury will step in and pay the bill. As long as the Federal government is in operation, FDIC insured deposits will continue to be paid.