First the Rice Fire, now a bank crisis

In the aftermath of last year’s devastating wildfires that destroyed homes and taxed the resources and perseverance of the most stalwart individuals, Fallbrook residents are starting to see the light at the end of the tunnel as long-awaited insurance checks arrive and companies make good on their promise to restore homes and hope.

Enter the bank crisis. Poor decisions and horrendous lending practices have rocked the banking industry, causing the first local bank failures our area has seen in the last 10 years.

The FDIC is there to assure the public that it will cover “up to $100,000” per person in each federally insured bank. But what happens to the people who put their life savings at the “big secure bank” only to learn they’ve lost deposit totals above that $100,000 threshold?

The fires of 2007 and today’s financial crisis may seem unrelated, but in an irony of sad coincidences they present Fallbrook residents with a common dilemma. If your bank can only cover your deposits up to $100,000, where do you put that long-awaited fire insurance check? Those who have lost everything once are not inclined to take a risk on the money that will become their new home.

Let’s review some possible solutions; some are more convenient than others.

Solution #1

To stay within the FDIC $100,000 threshold on individual deposits in a single bank, you can split your fire insurance check into $100,000 increments, depositing each in a separate account – at separate banks – in different locations – for different terms – with different interest rates – managed by different bankers.

Be sure to sort through multiple statements each month, making sure to track each account so that you don’t forget a maturity date or miss an incorrect fee charge. This will ensure that your deposits are FDIC insured. But it’s time-consuming and very inconvenient.

Solution #2

Again, to stay within the FDIC $100,000 threshold on individual deposits in a single bank, you can split your fire insurance check into $100,000 increments and open multiple accounts at one bank in the names of each of your family members: one in your name, one in your wife’s name, one in your daughter’s name, one in your son’s name – you get the idea.

It works. But it’s cumbersome, and you’re relinquishing control of your assets.

Solution #3

The Certificate of Deposit Account Registry Service (CDARS) is a FDIC insured program that covers your deposits up to $50 million at CDARS member banks. You get the security you need and the convenience you want. FDIC insured at one bank in the CDARS Network – with one statement – one rate of return – with one personal banker.

How does it work? When you place a large deposit with a bank in the CDARS network, CDARS is used to place your funds into certificates of deposit issued by other banks in the network. This occurs in increments of less than $100,000 so both your principal and interest are fully covered for FDIC insurance.

With CDARS you can rest easy knowing your large deposits are insured up to $50 million at your participating CDARS member bank. You get one statement from your bank for your CD at one great rate. That’s it.

“Getting back to normal” has new meaning for Fallbrook residents, and insurance for your nest egg is just as important as insurance for your home.

Gary Votapka is the president/CEO of Mission Oaks National Bank, based in Temecula with branch offices in various locations, including Fallbrook.

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