What does "millions lost their savings" mean?

[Freedom56]

Ok,
What is the guarantee or what is the proof that FDIC insurance actually worked?? Say if someone had 200k savings in Lehman brothers in 2008, did they get paid back??

I read somewhere that in case of a company getting insolvent, they debts are cleared and first and the retail account holders are paid if something is left over

I had Jumbo FDIC insured CDs at WAMU and Wachovia in 2008 ($100K in each which was the limit then). Both were covered in full when the two banks failed. The WAMU CD rolled into a JP Morgan CD for the remainder of the term and the Wachovia CD rolled into a Wells Fargo CD. Even in cases where the FDIC limit per depositor is exceeded, they are often covered in full.

 

[MissMolly]

Ok, thanks for the responses. To clarify, I am an SHE and soon to be a permanent resident of the USA and working in healthcare.

What is the guarantee or what is the proof that FDIC insurance actually worked?? Say if someone had 200k savings in Lehman brothers in 2008, did they get paid back??

I read somewhere that in case of a company getting insolvent, they debts are cleared and first and the retail account holders are paid if something is left over

I am curious why your profile says you are male and here you say you are female?

 

[RetireBy90]

Ok, thanks for the responses. To clarify, I am an SHE and soon to be a permanent resident of the USA and working in healthcare.

What is the guarantee or what is the proof that FDIC insurance actually worked?? Say if someone had 200k savings in Lehman brothers in 2008, did they get paid back??

I read somewhere that in case of a company getting insolvent, they debts are cleared and first and the retail account holders are paid if something is left over

so if you are somewhat unfamiliar with the setup here in USA, back in 2008 the limit for FDIC insurance was $100K. Since then it has been raised to $250K I believe. The proof is that it has never failed to pay out since it was setup after the depression of 30's.


Lehman was not an FDIC insured bank.

You are correct that in general, if a company goes bankrupt in court, that debt holders are satisfied or paid before equity holders. Banks are special case in that they pay into the FDIC, or Federal Deposit Insurance Corp and the many banks that pay into the insurance back the payouts to retail account holders. Normally if a bank is in financial trouble then regulators will work to get the problems fixed and if not they seize the bank and normally sell it or it's deposits and loans to other banks.

Keep this whole discussion of banks and savings separate from investments in your mind. We often think of savings as funds put aside for a specific purpose, like college, retirement, or other goals. This money put aside for retirement for example is normally invested rather than deposited in a savings account. So don't confuse my retirement savings with FDIC protection. If you purchase 100 shares of a company and they go bankrupt you loose your $$. If you deposit $100 at an FDIC insured bank and they go bankrupt you will get your $100 back, probably deposited in another bank that took over the deposits and loans from the old bank.

 

[dvalley]

OOPS! from the title I thought we were talking about divorces in America

 

[35nothing]

so if you are somewhat unfamiliar with the setup here in USA, back in 2008 the limit for FDIC insurance was $100K. Since then it has been raised to $250K I believe. The proof is that it has never failed to pay out since it was setup after the depression of 30's.


Lehman was not an FDIC insured bank.

You are correct that in general, if a company goes bankrupt in court, that debt holders are satisfied or paid before equity holders. Banks are special case in that they pay into the FDIC, or Federal Deposit Insurance Corp and the many banks that pay into the insurance back the payouts to retail account holders. Normally if a bank is in financial trouble then regulators will work to get the problems fixed and if not they seize the bank and normally sell it or it's deposits and loans to other banks.

Keep this whole discussion of banks and savings separate from investments in your mind. We often think of savings as funds put aside for a specific purpose, like college, retirement, or other goals. This money put aside for retirement for example is normally invested rather than deposited in a savings account. So don't confuse my retirement savings with FDIC protection. If you purchase 100 shares of a company and they go bankrupt you loose your $$. If you deposit $100 at an FDIC insured bank and they go bankrupt you will get your $100 back, probably deposited in another bank that took over the deposits and loans from the old bank.

Thank you for the details. I understand investment is subject to market risks and may lose value. My main concern was savings. I still have that socialist mindset and still prefer the savings+ Interest to grow the money

 

[Spock]

What would happen if the masses made a run on fdic insurance?

I was going to say "fire up the presses"
but these days its fixed with a few mouse clicks creating digital credits.
In then end, you got your money back, but probably after its inflated/devalued into Zimbucks.

 

[Spock]

No, you can use a bank that participates in: https://www.insuredcashsweep.com/home
and have multiple-millions FDIC insured with only one account needed.

On first sniff, that doesn't smell right.
I'd rather do the same with a Fidelity CD ladder that peanut butters the funds across multiple banks to stay FDIC insured.