In this thread, Johnny L.A. tells us he’s amassed a pile of money in the 6-figures range, and Chas.E warns him to spread his money around to some other banks or credit unions, obviously refering to the $100K limit that the FDIC will insure.
Now, I’ve always thought that if you had somewhat more than $100,000 in your account, you could simply open up a second account and deposit half of it, resulting in two accounts each well under $100K and all of it would again be insured.
But something about the way Chas.E said it made me start to get suspicious. Does the bank (or FDIC) consider each and every account number with your name on it to be a single account? If so, I’ll be needing a new strategy really soon.
Each depositOR is insured for $100k, not each account.
There seem to be some exceptions, it appears that the “each depositor” rule still vaguely holds, because these accounts are in different legal categories (i.e. joint accounts, which has at least one different depositor).
I have read many tales of woe from customers of failed banks that thought they were protected by FDIC just by having multiple accounts. If you want full protection from the FDIC insurance, you really must limit cash balances to $100k in each bank, and spread it around to more than one bank.
So does this mean that Bill Gates and other high-salaried people have to open an account at one or more banks each week, and, eventually, create banks each week, just to deposit their paychecks?
I would assume that each account holder is considered a depositor, therefore each account is insured up to 100K.
Well, I doubt any of them generally have that much cash on hand. Bill Gates just gave himself a big raise, he’s now making just under $500,000 per year. That’s a take-home amount of around $300,000 … which means about %25,000 per month. And then there are the daily expenses, charity gifts, and investments (I’m sure he doesn’t keep the bulk of his money in a 3% interest savings account). I doubt he has more than three or four bank accounts, even keeping each one under the $100,000 insurance limit. Who needs to have that much cash on hand? Sure, his net worth is over $50 billion-but most of that is in stock, mostly Microsoft stock. And there’s no way he could directly convert that to cash even if he wanted to-if anyone tried to sell that much stock at once, the price would drop like a stone. And if Bill Gates was liquidating MS stock, ‘drop like a stone’ wouldn’t even begin to describe it … the whole NASDAQ would probably fall like nothing you’ve ever seen.
It’s also worth remembering that most people don’t wander around wondering whether their bank is going to fail.
I mean, someone like Gates is probably not dropping his paycheck in “Bob’s Bank and Auto Bazzar.” And if Chase (or whoever) goes under, he’s got a lot bigger problem than the fact that he may have allowed his checking balance to tip over $100 K.
We’ve been here before concerning Gates - somebody asked how big a check he could write if wanted to. Like most corporate CEO’s, a majority of his fortune is tied up in stock in his company. The yahoo stock listings allow you to find declared shares held by insiders. In Gates’ case, he’s holding over 660 million declared shares of MSFT, accounting for a very large chunk of his fortune - he HAS sold quite a bit of MSFT stock - something around 40 million shares in the last year. Larry Ellison holds 1.3 BILLION Oracle shares.
Corporate officers in growing compaines will usually be compensated largely through stock options. They will probably have to pay capital gains when they sell them, so as long as they still have faith in their companies, they will tend to let them ride. In fact, large insider trades are often taken as a very adverse signal by a lot of investors, and the big insiders have to think very hard before dumping a lot of stock.
I doubt that people who DO have large salaries are relying that much on FDIC insurance - they are investing in things other than letting significant amounts of their money sit in the bank (they may well have over $100K in a bank account, but that’s pocket change for people at this level). If they are VERY safety oriented, they probably get their insurance by putting a lot in government securities - I heard someone discussing what Allen Greenspan does with HIS money - turns out that he has a very large allocation in treasuries. Government securities aren’t TECHNICALLY insured, but if they ever default we are in SERIOUS trouble, and I wouldn’t bet on the integrity of the banking system if things are that bad.
FDIC limits are per depositor, not per account, but there are perfectly legal ways to protect more than $100,000 at one institution. For example, if I have a joint account with my wife we are both insured for the full amount, or $200,000 in that account. For more ways to protect your money legally under the FDIC, go to the source:
