what happens when a bank in the US goes bankrupt?

sarahd

Mon, Jan 05 2009, 5:52 am

Bank accounts up to $100,000 (it may have been raised to $250,000) are insured by the FDIC, the Federal Deposit Insurance Corporation, which was founded in the wake of the Great Depression in which millions lost all their savings.

You can probably find out more about this on the FDIC website, assuming there is one.

bbmom

Mon, Jan 05 2009, 6:39 pm

Quote:

On September 26, 2008, Washington Mutual, Inc. and its remaining subsidiary, WMI Investment Corp., filed for Chapter 11 bankruptcy.[29] As a result, it was delisted from the NYSE, and now trades on Pink Sheets.

All assets of the bank and most liabilities (including deposits, covered bonds, and other secured debt) of Washington Mutual Bank's liabilites had been assumed by JPMorgan Chase.[30] However unsecured senior debt obligations were not assumed, leaving holders of those obligations with little meaningful source of recovery.[30] On Friday, Sep. 26, 2008, Washington Mutual customers in the branches were given a letter that said the combined banks have 5,400 branches and 14,200 ATM's in 23 states. [31]

For the time being, Washington Mutual account holders can continue banking as normal. Deposits held by Washington Mutual are now liabilities of JPMorgan Chase.

I pasted this from wikipedia just to give you an idea of what happened here when a major, national bank went under. In this case the government prevented the bank from completely closing by seizing the bank's assets and selling them for a fraction of the worth (1.9 billion) to another major bank. US banks are under strict regulation because the danger of bank failure, and typically if the bank is a major one the government will protect it from going under. In such a case the consumers are usually unaffected. (The Washington Mutual customers are now Chase customers...)

In the event that a bank does go completely under and closes, then you are protected by FDIC insurance.