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What if my bank fails?

CHARLOTTE, N.C. — The government's seizure of IndyMac Bank raises concerns for many consumers about whether their banks might be next.

Although it is unlikely the nation will see thousands of banks fail as they did during the savings and loan industry collapse in the late 1980s and early '90s, analysts predict there will be more battered financial institutions unable to survive in today's marketplace.

Here are some questions and answers about the government's role when a bank fails and if other banks are at risk:

Q: What happens when the government takes over a bank?

A: In such a case, called a conservatorship, a bank's regulator takes control of the company and oversees its operations. The move is to maximize the value of the institution for a future sale and to maintain banking services in the communities formerly served by the bank.

Q: Is my bank at risk?

A: John Bovenzi, the former chief operating officer of the FDIC put in charge of IndyMac, assured consumers late Sunday that bank failures have been rare in the past, and that, if more banks do fail, the government has enough money in reserve. According to regulatory policy, no advance notice is given to the public before a bank's assets are seized by federal regulators.

”I think the important point to make is that, historically, only a very small percentage of the banks on our problem banks list ever failed,“ Bovenzi said on CNN. ”While there are 90 banks on the list, there would be no expectation that 90 of those banks would fail.“

According to the FDIC, IndyMac is the fifth U.S. bank or thrift to fail this year. In 2007, only three financial institutions failed, a small number when compared with the 2,808 between 1982 and 1992.

Q: How can I make sure my money is safe?

A: All deposit accounts worth $100,000 and less are automatically insured by the FDIC. Many retirement accounts, such as IRAs and 401(k)s, are insured to $250,000 a person. But since it's a person's aggregate deposits, and not their individual accounts, that are insured, any amounts over $100,000 deposited at any one bank are not covered.

In a joint account, each depositor is insured up to $100,000.

The FDIC has information about its insurance on its Web site, at http://www.fdic.gov/deposit/deposits/insured/yid.pdf.

Although keeping more than the limit at any bank means taking a chance, the risks can be bigger with smaller companies, provided they're heavily exposed to mortgage and other debt during the current downturn.

Q: How much money does the FDIC have?

A: The FDIC has nearly $53 billion in insurance funds. Beyond that figure, Bovenzi said, the FDIC would go to other banks to raise more money. In such a case, consumers could expect to see some of that passed on to them in the form of higher fees, he said.

The current estimated loss to the FDIC resulting from IndyMac's failure is between $4 billion and $8 billion.

Q: Does the government's decision to aid Fannie Mae and Freddie Mac help the nation's banks?

A: Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte, says yes. ”As mortgage money becomes harder to get and real estate prices go down even more, the solvency of many banks is called into question,“ Plath said. ”The Fed is moving to protect the solvency of the banking industry by maintaining integrity.“

Even so, the exact outcome is left to be seen, said Eva Weber, an analyst at Aite Group, a financial services research firm.

”One must have a bit of faith in the FDIC that they are going to be able to take care of whomever fails,“ she said.

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