If anybody has $250,000 in the bank these days, the Federal Deposit Insurance Corp. will guarantee that amount per account per institution.
The Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law Wednesday by President Obama makes the coverage limit permanent and goes further by making it retroactive to January 2008.
That maximum had been temporary, raised from $100,000 by the FDIC in October 2008 after several banks failed and many people lost much of their savings.
Most banks are in the FDIC program, but the retroactive provision would cover six institutions that failed that year before the higher limit. None are headquartered in New York.
“This retroactive increase has reduced the number of uninsured depositors at these failed institutions from more than 10,000 to approximately 500,” the FDIC said in a statement. The agency said checks will be mailed to depositors this month. To learn more, uninsured depositors of these institutions can visit the FDIC's website or call toll-free on 1-866-806-5919.
The most high-profile failure was California-based IndyMac Bank, which several federal officials and employees put at the feet of U.S. Sen. Charles Schumer.
In mid 2008, the New York Democrat, then chairman of the Joint Economic Committee, which studies issues affecting the economy, released his letters asking the FDIC and the Office of Thrift Supervision what they had done about IndyMac because it "could face a failure if prescriptive measures are not taken quickly."
Afterward, customers made a run on IndyMac, withdrawing more than $1.3 billion before the Office of Thrift Supervision seized the bank July 11. It was the second-largest financial institution to close in the nation's history.
Schumer insisted no law was broken, and he was later cleared when California’s attorney general declined to investigate, saying his statements may have accelerated the bank’s failure, but it would be hard to prove the letters caused IndyMac’s demise.
Indymac had been one of the country’s major subprime lenders and that industry imploded in late 2007.
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