Is your bank safe? If it does most of its business in Florida, California or other areas severely affected by the housing downturn, then there’s a good chance it is not. But the FDIC, the government institution designed to secure your deposits, won’t tell you whether your bank is about to fail, for fear of inciting a depression era run on the banks. From the FDIC website:

The FDIC never releases its ratings on the safety and soundness of banks and thrift institutions to the public.

The FDIC does disclose the list of failed banks (rescued with your tax dollars), which includes some pretty big names:

  • ANB Financial, National Association, Bentonville, Arkansas, with approximately $2.1 billion in assets was closed in May
  • First National Bank of Nevada, Reno, Nevada, with approximately $3.4 billion in assets was closed in July
  • IndyMac Bank, F.S.B., Pasadena, California, with approximately $32.01 billion in assets was closed in July
  • First Priority Bank, Bradenton, Florida, with approximately $259 million in assets and approximately $227 million in deposits was closed in August
  • NetBank, Alpharetta, Georgia, with approximately $2.5 billion in assets and $2.3 billion in total deposits was closed in September, 2007

Other financial institutions (i.e. Bear Sterns, Freddie Mac, Fannie Mae) have been deemed “to big to fail” by the United States government, and are being given free reign to the government coffers and your tax dollars.

It is widely expected that many more banks will fail this year and next due to the irrational lending habits of the now collapsing housing bubble and likely soon to collapse commercial real estate bubble. Many banks have learned a painful lesson that it is very easy to get an unqualified person to sign their name on the mortgage, but it is much more difficult to collect the payments.

In light of all the failures, the FDIC recently published the FDIC’s depositor Bill of Rights. From number four on that list:

You have the right to deposit insurance coverage of $100,000 for your deposits at an FDIC-insured bank – up to $250,000 for your IRA deposits.

But if you are not ready to deal with the uncertainty and hassle of collecting on that insurance, you may want to check your own bank with the independent bank ratings. There are many of them available, including Bankrate’s Safe and Sound ratings. You can easily search by institution, state, zip code, asset size or rating.

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