Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation earned only $5 billion in the second quarter of 2008, an 86 percent decline of $31.8 billion form the second quarter of 2007. With the exception of the fourth quarter of last year, the latest earnings were the lowest for the industry since the fourth quarter of 1991.
"By any yardstick, it was another rough quarter for bank earnings, but the results were not unexpected as the industry coped with financial market disruptions, the housing slump, worsening economic conditions and the overall downturn in the credit cycle," said FDIC Chairman Sheila C. Bair.
The FDIC's "problem list" grew to 117 institutions from 90 at the end of the first quarter. That is largest number on the list since the middle of 2003.
For consumers, these are unsettling numbers as banks have become one of the last refuges for cash, with the collapse of real estate and with Wall Street stuck in a rut. Just how much peace of mind can consumers take from the words "FDIC Insured?"
The agency says consumers with money in FDIC insured institutions should be able "to get a good night's sleep." The agency recently issued an "FDIC-Insured Depositor's Bill of Rights" that spells out the agency's promise to bank customers, plus information about a new advertising and education campaign to raise awareness about deposit insurance coverage limits. Among the key points for consumers to remember:
• If someone's deposits are within the FDIC's insurance limits, as is the case for most bank customers, those deposits are safe regardless of the financial condition of the bank.
• The FDIC's guarantee --that it will protect against the loss of insured deposits if an FDIC-insured bank or savings associations fails -- is ironclad. As FDIC Chairman Sheila C. Bair said, since the creation of the FDIC 75 years ago, "no one has ever lost so much as a penny of FDIC-insured deposits -- not a single penny," as a result of a bank failure.
• The FDIC protects deposit accounts including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs) up to the federal limits. But FDIC insurance doesn't protect against losses on non-deposit products -- such as stocks, bonds and mutual funds -- even if they were sold by insured banks.
• The basic insurance coverage is $100,000 per depositor per insured institution, but individuals may qualify for more than $100,000 in coverage at one insured bank if they own deposit accounts in different "ownership categories," such as single accounts, joint accounts, certain retirement accounts, and trust accounts.
• Consumers who have questions about their insurance coverage can call the FDIC toll-free (1-877-ASK-FDIC, which is 1-877-275-3342), read or print information online at www.fdic.gov, or send questions to the FDIC in an e-mail or letter.
• If a bank fails, the FDIC provides quick access to insured funds, usually on the first business day after the institution is closed. It is also possible to recover money over the FDIC's insurance limits, depending on how much the FDIC recovers by selling the bank's assets. In some cases, the FDIC is able to make an initial payment on the uninsured portion of deposits within a few days or weeks. Additional payments are made over the course of a year or two after the bank failure.
