The current liquidity crisis in the stock market is endangering bank depositors who invest in CD’s (Certificates of deposit) at weak banks. Many such banks entice investors by stating their CD pays a much higher interest rate than other banks and is FDIC insured.
While that may be true, in most accounts FDIC insurance is limited to $100,000.
Recently, a trucker invested his life savings of over $600,000 in CD’s at a local bank and when that bank went
bankrupt he found out only $100,000 was covered by FDIC insurance.
If you invest in CD’s and have over $100,000 in a given bank, you should check the financial solvency of the bank to make sure it is performing well. One way to do that is to go to a site that rates bank safety or to otherwise research the
solvency of your bank.
The recent Countrywide Mortgage difficulties have had customers at Countrywide Bank very nervous about the state of their deposits.
Even if the FDIC covers your deposits or CD’s, it may take a long time for the government to release the funds to you.
Consumers are advised to act prudently.