It’s scary to think about, but I've had a few people ask me about the strength of their banks and if their cash was safe. Am I personally worried about mass bank failures? No, not at all. We are in the business of managing risk and therefore without trying to scare anyone, I thought it would be helpful to address ways to limit your risk in the event of a bank failure. What I am telling most clients is that if you have over $100,000 in cash equivalents at one bank, consider putting the rest into Treasury Bills. Read the following quote taken from the FDIC website:

"Customers who purchase T-bills at banks that later fail become concerned because they think their actual Treasury securities were kept at the failed bank. In fact, in most cases banks purchase T-bills via book entry, meaning that there is an accounting entry maintained electronically on the records of the Treasury Department; no engraved certificates are issued. Treasury securities belong to the customer; the bank is merely acting as custodian.

Customers who hold Treasury securities purchased through a bank that later fails can request a document from the acquiring bank (or from the FDIC if there is no acquirer) showing proof of ownership and redeem the security at the nearest Federal Reserve Bank. Or, customers can wait for the security to reach its maturity date and receive a check from the acquiring institution, which may automatically become the new custodian of the failed bank's T-bill customer list (or from the FDIC acting as receiver for the failed bank when there is no acquirer)".

It’s not time to panic, but it is time to take a step back and evaluate your positioning. What I would suggest is that you take note of how your money is positioned so you can evaluate the potential risks. Take a look at how you hold your cash, the stability of your bank and your needs for the cash you have in savings. If you have any questions please let me know.

Also be sure to visit this link to the FDIC website. It explains how their insurance works in greater detail: Click Here

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Tags: Greg, Cash