Divide and Conquer

This morning, I saw yet another news article about IndyMacBank and the depositors who are attempting to get their money out of the beleaguered financial institution as fast as possible. Some of these folks have in excess of $200,000 in their accounts; but, because funds are only insured for their full value up to $100,000, these people may only get that fully insured amount and then (possibly) 50% of the amount on deposit above that. What does that mean? If you have $250,000 on deposit, you will get $100,000 for sure. Then, you will get 50% of the rest, or $75,000. That means you will lose $75,000. Not good. The simplest way to avoid this scenario? Divide the original $250,000 among various financial institutions so that no one account goes above the fully insured amount.

Another word to the wise: if you do not have money in IndymacBank, or one of the other banks in danger of failing, leave your money alone. If those of us whose financial institutions are sound run to the bank and withdraw our money, the banking industry (and the economy for that matter) will become even more volatile. Protect your funds as much as possible while still leaving them on deposit. The bank cannot function without your money; but, more importantly, the bank cannot function without your trust and confidence in their ability to weather this financial storm.