Word: fdic
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...bank does go under before it can be rescued, the FDIC dispatches liquidators to go over the books and physically man tellers' stations to dole out money to depositors. Usually they are handing out money four or five days after the bank has closed...
...dramatic example occurred in 1970 when Eatontown National Bank in New Jersey, the victim of a multimillion-dollar embezzlement, was closed by Government order, then invaded by a score of banking agents. When anxious depositors phoned the bank, they heard an operator greet them with "FDIC." Eventually $13.5 million was handed out to 9,904 depositors...
...very rare cases-for instance, when a community's only bank fails-the FDIC will set up a Deposit Insurance National Bank to provide services and will run it for as long as two years, or until investors can be persuaded to establish a private bank...
...provided not by taxpayers but by the insured banks, which pay premiums equal to one-twelfth of 1 % of their deposits; a $3 billion emergency line from the Treasury has never been used. The deposit insurance fund stands at $6 billion. Over the 42 years of its existence, the FDIC has disbursed $1.6 billion to depositors in some 500 failed banks. All but $247 million has been recovered through sale of assets...
There are limits to the safety provided by the FDIC. It does not insure against losses caused by fire or robberies. And people who have deposits of, say, $60,000 can collect only the first $40,000 if their bank collapses. But even they stand a good chance of getting most of their money back. Legally, depositors get first crack at any money raised by sale of a failed bank's assets...