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Rounding up answers on bank and S&L deposit insurance

We seem to have reached people where they -- or at least their money -- live. A couple of weeks ago, this column discussed deposit insurance provided to banks by the Federal Deposit Insurance Corporation (FDIC) and to savings-and-loans by the Federal Savings and Loan Insurance Corporation (FSLIC). Since then, we have received more letters on that subject than on any previous column.

Most of the letters asked for additional information on deposit insurance. So, with the help of Roger Hood, assistant general counsel in the FDIC's legal division, we are dedicating this week's column to some of those questions. Coverage on joint accounts

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In your article, you mentioned that the legal obligation [for FDIC and FSLIC insurance] is $100,000 per person, not per account. My husband and I have three joint accounts in one FDIC-insured bank. We keep each account below $100,000. Does this mean we are insured for a total of $200,000 for all accounts because there are two persons? Is this true even if one account may exceed $100,000?-- E. M.

A joint account is treated as a person by the FDIC, Mr. Hood says. So you could have one account, your husband could have a second account, and the two of you could have a third, joint account, and all three would be fully covered. If you have two joint accounts that add up to more than $100,000, however, the excess would not be insured. And you would not be covered up to $200,000 simply because there are two persons.

Thus, if you want to maintain more than one fully insured joint account, and all the accounts put together are likely to add up to more than $100,000, you should probably move two of your three accounts to different banks or savings-and-loans insured by the FDIC or FSLIC. Community-property status

Does the $100,000-per-person limit mean that a husband and wife in a community-property state who have an account in excess of $100,000 are each covered up to a maximum of $100,000?-- V. W.

The FDIC does not make a distinction for community-property states, Hood says. So the same per-person limits apply here as in the previous letter. Actually, he adds, the FDIC favors the term ``depositor'' over ``person,'' since some depositors, like corporations, are not really persons, but their accounts are still insured in full. Differences between FDIC and FSLIC

Someone once told me that in the event of a bank failure, the FDIC will pay a depositor all of his money up to the $100,000 limit right away, while the FSLIC will pay savings-and-loan customers only 10 percent of their money until the institution is taken over by another S&L and reopened. This could be a long wait. Is it true?-- J. H.

No, says Andrea Johnson, spokeswoman for the Federal Home Loan Bank Board, the agency that includes the FSLIC. As long as the FSLIC is involved in the closing or takeover of an S&L (and it gets involved as soon as the institution starts having any trouble that could result in closing or takeover), the same rules on deposit insurance apply. This means your account is insured up to the full $100,000 limit. Ms. Johnson says there is no provision for any partial coverage or payment to depositors.

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Is it possible, however, for either the FSLIC or the FDIC to help with a merger or takeover that would result in the institution's suddenly operating under a new name. The name change often takes place overnight. In this case, there would be no need for paying off insurance claims, since deposits held by the new owners of the bank or S&L would continue to be federally insured. Coverage on trust accounts

We have in the same bank a joint checking-savings account and a separate-custody account in the trust department, also in our two names. Our holdings in the trust account are entirely in US government notes. Does the $100,000-per-person limit apply to both accounts?-- A. B.

In this case, Mr. Hood says, you are fully covered, but not because of a wrinkle in FDIC rules. Because your trust assets are in US government notes, those notes are issued by the Treasury Department and are backed by the full faith and credit of the US government. In other words, Congress will back up those notes just as it does the insurance of the FDIC and the FSLIC.

As investment managers, however, trust departments can also put customers' money in common stocks, real estate investments, and municipal bonds, as well as accounts or certificates of deposit at the bank. The nonbank investments would not have any more insurance than if you had put your money in them yourself through a broker, and the bank deposits would fall under the same per-depositor rules mentioned earlier. Are all accounts covered?

Are all types of accounts are covered, including certificates of deposit and special high-interest accounts paying higher than normal interest, as well as traditional savings and checking accounts?-- F. B.

``All deposit accounts are covered,'' Hood says. That includes checking, savings, money market deposit accounts, CDs (even CDs with extra high promotional rates), and money in trust accounts held at the bank. Insurance also covers some of the more ``esoteric'' accounts, he says, such as money held in escrow for property tax payments. So if you include property taxes in your monthly mortgage payment, and the bank only pays your city or town property taxes twice a year, the money in escrow is insured in the meantime.

Direct investments in the bank itself, such as stock, would not be insured, Hood points out.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given. References to investments are not an endorsement or recommendation by this newspaper.

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