With this week's 'run' on Countrywide Financial's California bank branches, and with some major worries in the money market account world, some natural questions arise in regard to FDIC insurance.
If Countrywide (or any other FDIC insured US bank) goes under, do the depositors get all of their money back ? The answer is yes, up to a $100,000 balance
How long could it take before the depositors actually get paid by FDIC ? The answer is up to SEVEN YEARS !
If the FDIC payoff takes a long time, do the depositors get paid interest on the money they are 'owed' by FDIC ? The answer is NO there is no interest paid.
Like any other 'insurance company', the FDIC doesn't have anywhere near enough assets to be able to pay off on 'claims' that start coming in at a rate that is 5 or 10 or 50 or 100 times normal. But unlike other 'insurance companies' the FDIC has the good ol' US taxpayer to fall back on if the amount of 'claims' exceeds the reserves/ability to pay them. This is the reason for the (up to) seven year delay. In the event of the failure of some really huge US bank, 'middle class' US taxpayers would wind up paying increased taxes over a seven year period, with the additional tax money being used to pay off their own FDIC claims, as well as the FDIC claims of other Americans who don't have to pay much in taxes.



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