FDIC Myths & Misconceptions

I have heard twice in the last week that the FDIC has no formal time limit to repay depositors in the event of a bank failure, creating a stir.  The story goes that while you are protected to the stated limits, that you may not get back your money for 25 or even more years (I have heard as long as 99 years).  After a little digging, I found a friendly and trustworthy reply on Snopes.com, and the subsequently found the FDIC’s top 10 FAQ list, both pasted as links below.

Good news is that this is in fact a myth.  The text below is pasted from the FDIC website:

Misconception Number 3: If a bank fails, the FDIC could take up to 99 years to pay depositors for their insured accounts.

This is a completely false notion that many bank customers have told us they heard from someone attempting to sell them another kind of financial product.

The truth is that federal law requires the FDIC to pay the insured deposits “as soon as possible” after an insured bank fails. Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.

Sources:
FDIC
Snopes, November 8, 2008,  Accessed January 23, 2009
http://www.snopes.com/business/bank/fdic.asp

Misconceptions: A Top 10 List
FDIC, Spring 2006, Accessed January 23, 2009
http://www.fdic.gov/consumers/consumer/news/cnspr06/leadstory.html

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