Deposits in Bank Yours but Insured/Guaranteed?

Frances Coppola explains your money on deposit in a modern commercial bank:

A deposit in a lending bank is simply an unsecured loan to that bank. The bank can do whatever it likes with the money, and there is no legally-enforceable guarantee that it will even return the money, let alone invest it responsibly for decent returns. In the event of bank failure, depositors are only entitled to a share of the failed bank's assets in accordance with seniority rules - and that means, at present, that they rank behind secured creditors such as covered bond holders and equally ("pari passu") with other unsecured creditors such as senior bond holders.

Lender, beware

Tom Usher

Tom Usher

According to FDIC statutory language, it is still your money; but, you are lending it to the bank with no guarantee other than what is written in the deposit agreement and whatever FDIC or other insurance or third-party arrangements are made, including by you.

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  • Tom Usher

    About Tom Usher

    Employment: 2008 - present, website developer and writer. 2015 - present, insurance broker. Education: Arizona State University, Bachelor of Science in Political Science. City University of Seattle, graduate studies in Public Administration. Volunteerism: 2007 - present, president of the Real Liberal Christian Church and Christian Commons Project.
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