Pray that you do not have to become involved in figuring out when a failed bank has established its final deposits, as the Federal Deposit Insurance Corp has always done.
The FDIC just issued new regs on how and when it takes over a failed bank. Timely, no?
Here’s the catch: With banks operating across time zones, with various “sweep” account functions, and generally much more complexity than ever before, the FDIC will have a devil of a time deciding when an insured account is done settling after an FDIC takeover of an institution.
For that reason the FDIC has given itself authority to impose an FDIC Cutoff Point for transactions beyond which money with not be allowed to flow out of a bank it has taken over. The banks did not want this FDIC Cutoff Point, arguing that’ll just create more uncertainty and confusion. Could be.
But there is also little doubt that the FDIC will not be able resolve future bank insolvency unless it has this sort of Hand of God power to turn away claims on funds at some point. In other words, when you take the federal insurance, be prepared to play by the federal rules.
