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Deposit insurance

Will you please explain the difference in the federal insurance for banks and savings and loan associations? A banker told me that if a bank were closed, depositors would be paid off within 48 hours, whereas a savings and loan closure could delay return of deposits up to five years. F. S.

This tale keeps popping up with surprising regularity. The Federal Deposit Insurance Corporation (FDIC) currently insures deposits up to $100,000 -- recently increased from $40,000 -- for one account. The Federal Savings and Loan Insurance Corporation (FSLIC) similarly insures deposits in S&Ls. Both quasi-government corporations were formed in 1934 and function similarly.

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In the event of a bank or S&L failure, another institution may assume deposit responsibilities with help from FDIC or FSLIC, or the bank or S&L would be closed and depositors paid off promptly -- usually within a matter of days. Bank depositors are unlikely to get their deposits back any sooner than S&L depositors. You should be aware that only about 9 or 10 savings and loan failures have been recorded since 1934, while bank failures number in the hundreds.

Since your inquiry specified "federal" insurance, the above answer is limited to FDIC and FSLIC. State insurance for banks and S&Ls is not available everywhere, and some banks or S&Ls are not members of FDIC, FSLIC, or other insurance organizations. Be sure your institution is insured by some agency.

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