Please Replay Bank Takeover Procedures

chisueAugust 2, 2009

We have some CDs at Corus Bank in Chicago, which is about to be closed down by the Feds. For all I know that's happening today, Sunday.

Our 12 month certs mature the end of Spetember. I believe we *own* what we put in plus what we've 'earned' up to the date the bank closes. Is that correct? (I don't want to discover I'm like the Madoff investors who believed they had what Bernie said they had on the statements he sent them!)

Once the bank folds, what happens to our investment? Do the Feds cash out to us at the time of failure? Do the CD's continue to earn the same APY until they mature? Less? Nothing? Do we have any choices that don't involve penalties?

Thank you, banking gurus.

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The deposits of failed, FDIC insured institutions are typically sold to a healthy bank at 100% of value.

In most cases, the acquiring bank will honor the rate and term of any deposits it buys; however, if it decides not to, it will send you a check for your original deposit, plus any accrued interest through the date of the closure of the deposit, paid by the bank that acquired your deposit. There would not be any penalties owed by you for this action.

I have not heard any cases of customers losing deposit money, even if it is above the insured amount; that doesn't mean it cannot happen, it just hasn't happened yet. I would not worry about it right now; however, if your deposits bring you over the insured amount I would start spreading money around to ensure that your deposits are fully covered in the future. Not sure if this applies to you, but thought I'd mention it.

Good luck and tell us who buys Corus.

    Bookmark   August 2, 2009 at 5:22PM
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Traditionally, the transition should be seemless. Obviously, they do these things behind the scenes so there's not a run on the bank. If there's been a buyer for Corus, the bank and its branches should open under a new name tomorrow (or whenever the seizure/buyout takes place) with all assets/accounts transfered in their entirety. There were four bids to take Corus over as of the last week in July.

In any case, should a buyout fail, assets will be transferred - not cashed out - to a financially sound institution. You don't lose in these happenstances, either principle or APY.

    Bookmark   August 2, 2009 at 5:36PM
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Corus bank has FDIC coverage so you should be fine. This bit is from their site:

"FDIC Increases Coverage to $250,000 through 2013 The standard FDIC insurance amount has increased from $100,000 to $250,000 per depositor and is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor. FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009."

The FDIC details exactly what happens (and when) at this link.

    Bookmark   August 3, 2009 at 8:40AM
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It isn't at all certain how Corus will be divided up. Nobody wants it in toto. It looks increasingly less like a bank and more like a black hole of bad condo mortgages and foreclosures!

Our CD's are under limit, earning 4.6% APY. I was just wondering if I should do anything (or could do anything without penalties) before the ax falls.

We also have a MM at Corus. Might be prudent to cash out of that now.

All advice gratefully recieved!

    Bookmark   August 3, 2009 at 10:19AM
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If I had FDIC insured CDs earning over 4.00% APY, I'd let them ride as long as possible. I think you could go ahead and start shopping for a new bank and think about where you want to move your accounts if you decide you don't like the institution that ends up acquiring your deposits. Keep in mind that the acquiring bank may very well offer you attractive rates to keep you as a customer, though.

If I was you and my accounts were completely insured, I wouldn't do anything right now, except maybe start shopping for a new bank to move my deposits to if I didn't like the new owners. Keep in mind that it is very doubtful you would see rates anywhere near what you are getting on those CDs, but also keep in mind that it is very possible that the new bank will offer you very attractive rates to keep your business.

No one wants any of these banks in total. Other banks will likely clamor for the branches and deposits, but the loan portfolio will likely remain at the FDIC. To a bank, deposit money represents both borrowed funds and new customers, both of which are very desirable in this economy.

    Bookmark   August 3, 2009 at 1:00PM
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