Two Banks Fail, But Depositors Are Fully Covered
On July 25, 2008, the regulator for nationally-chartered banks (the Office of the Comptroller of the Currency) seized two insolvent banks, First National Bank of Nevada, headquartered in Reno, Nevada, and First Heritage Bank, N.A., headquartered in Newport Beach, California. After the banks were closed, the FDIC was named Receiver.

Here's what's particularly noteworthy: the FDIC did a deal with Mutual of Omaha Bank, Omaha, NB, to acquire many of the assets of the failed institutions and assume all deposits, both insured and uninsured. In doing the deal, the FDIC weighed the costs of administering the claims on the uninsured portion of deposits (as well as other factors) and determined that allowing Mutual of Omaha Bank to acquire all deposits (and not just the insured ones) was the "least costly" resolution for the Deposit Insurance Fund, compared to all alternatives, because the expected losses to uninsured depositors were fully covered by the premium paid for the two banks.

FDIC reports this is the second time in the last two years in which another bank acquired a failing bank's insured and uninsured deposits. Ten banks have failed in the last two years.

Depositors of the two failed banks can breathe a sight of relief and proceed with business as usual. They automatically become depositors of Mutual of Omaha Bank.

Trust, but verify, when it comes to deposit insurance
Occasionally, when a financial institution fails a customer will learn the hard way that his deposits aren't insured in the manner he thought they were.

For example, after one recent failure, a customer said that when she set up a money market account and purchased a CD, she had asked the new accounts representative if the funds (with a combined total of well over $100,000) would be fully insured. She was reportedly told that they would, because the two were different types of accounts. Wrong!

The customer learned only after the FDIC became receiver that the bank employee was incorrect (or the customer misheard or misunderstood what she said). The two accounts had to be aggregated under the terms of the FDIC rules and would be insured, in the aggregate, only for up to $100,000.

Most bankers are well-versed in the intricacies of deposit insurance coverage, so this type of scenario should be rare, but smart customers will use tools readily available online from the FDIC to verify for themselves how the insurance will apply.

Just a couple of clicks away is FDIC's Electronic Deposit Insurance Estimator on our Bank Failures page in the Featured Links section. Nicknamed EDIE (for its acronym), it's a web-based, interactive application that allows you to put in all the information about your accounts and how they're structured, how much is in them, etc. and, based upon the insurance rules, it will calculate precisely what the deposit insurance coverage would be in the event the bank failed and provide a report. Oh, and did we mention it's free?

A few words of advice. When you go through it, you need to give it your total concentration and read each question carefully. You know the old saying with computer stuff -- garbage in, garbage out. If you don't put in the right information, the report generated will not be reliable. FDIC has created an incredible tool. Use it to help you make informed decisions about deposit insurance matters.

Fraud Warning from the FBI

The FBI has warned consumers that with all the natural disasters, fraudulent requests for assistance will increase. They recommend paying attention to these following points:

• Do not respond to unsolicited (spam) e-mail.
  
  
• Be skeptical of individuals representing themselves as officials soliciting via e-mail for donations.
  
  
• Do not click on links contained within an unsolicited e-mail.
  
  
• Be cautious of e-mail claiming to contain pictures in attached files, as the files may contain viruses. Only open attachments from known senders.
  
  
• To ensure contributions are received and used for intended purposes, make contributions directly to known organizations rather than relying on others to make the donation on your behalf.
  
  
• Validate the legitimacy of the organization by directly accessing the recognized charity or aid organization's website rather than following an alleged link to the site.
  
  
• Attempt to verify the legitimacy of the non-profit status of the organization by using various Internet-based resources, which also may assist in confirming the actual existence of the organization.
  
  
• Do not provide personal or financial information to anyone who solicits contributions: providing such information may compromise your identity and make you vulnerable to identity theft.