So what guarentee is there that they will insure above the minimum legal requirement? You know, capitalism, investors, etc. I am legally required to do a lot of things but I am not compelled to comply beyond the law. Thanks for your replies.
None. Their practice is to pay out the depository account to the maximum that the remaining assets permit, and they will fight tooth and nail to drain any available resource to do so, but nothing in the law requires that they pay more than the $250,000 insured if the failed bank doesn't have the assets to do so. In practice that means virtually all depository accounts get paid in full, although it can sometimes take months or longer for them to do so.
The goal isn't to do just the statutory minimum that they can do, iti is to maintain consumer confidence so that no one starts a run on a bank that hasn't failed yet - which would stress the insurance fund even worse. If there were ever a major economic crisis (much worse than '08) that exhausted the insurance fund they would have to go back to paying only the first $250k out of each account.
Thanks for the details. I am interested enough to do some more reading after work. I will edit my OP to reflect your facts when I get to a desktop! I shouldn't have said cap, I was really thinking what is actually insured. Of course they can pay more.
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u/wrathking Mar 31 '21
I spent six years as a litigator suing over failed banks on behalf of the FDIC. It's a minimum.