Oct 7, 2008 8:44 pm US/Central
How Do You Know If Your Bank Is Safe?
CHICAGO (CBS) ―
Thirteen banks in the United States have failed already this year, and more could soon follow. So, how do you know if your bank is safe? And what do you do in the midst of this huge financial crisis?
CBS 2's Rob Johnson reports that Chicago bank customers are naturally jittery. Nine banks have failed nationally just since the end of June including Washington Mutual where nervous depositors pulled out $16 billion over 10 days, making it one of the largest bank failures ever.
"It's very frightening what we've done to our financial system," said DePaul University Professor Rebel Cole.
Cole would know - he once tracked bank failures for the Federal Reserve. Now he watches the financial disaster unfold daily, and urges calm. After all, the new bailout bill calls for insurance on each bank account of up to $250,000 per customer, $500,000 for a joint account.
"Big bank, small bank- it doesn't matter. The FDIC is there to cover any shortage of funds from losses of a bank," Cole said.
The Federal Deposit Insurance Corporation currently has $45 billion in reserves. But the bailout bill also calls for an unlimited line of credit for the FDIC to get through this.
"I believe in the government a little bit, and I hope they are doing the right thing," a consumer said.
So, what about your bank? Chase, Northern Trust, and Harris Bank get a "best" rating from financial rating firms, while Bank of America and MB Financial merit a "good" rating. According to Bauer Financial, Corus Bank in Chicago is listed as one of 40 in Illinois that are "problematic." In a press release, Corus' president said he fully expects "Corus to be able to absorb any losses" and is "confident that we can weather this storm."
"I've been with the bank for a long time and I feel real secure with it," a Corus Bank customer said.
Cole says the current crisis pales in comparison to the hundreds of S & Ls that failed in the 80s and 90s. He does believe the banking industry's long term health will be dependent upon how Treasury Secretary Henry Paulson spends the $700 billion Congress approved for the bailout.
Cole says remember to "mostly relax. Nobody has ever lost a dime in an FDIC-insured account."
If your bank ends up being bought, it usually happens over the weekend. Cole says most people hardly notice the change.
To find out how your bank is doing and how it's rated, visit
www.bankrate.com or
www.bauerfinancial.com.
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