Will My Bank Fail?

Last Friday, two more banks failed. Meridian Bank in Eldred, IL and Main Street Bank in Northville, MI were closed by their respective regulatory agencies and their deposits were transferred to other banks. Deposits at Meridian Bank went to National Bank of Hillsboro, IL and Main Street Bank deposits went to Monroe Bank & Trust in Monroe, MI. For customers, it was no big deal as the FDIC guarantees deposits up to $250,000 through the end of 2009.

So, you might be asking yourself, will your bank join this list of failed banks? The best thing you can do help your bank fail is to withdraw your deposits right now. Banks fail because they lack the liquidity to meet their needs and pulling out funds is the easiest way to help your bank fail. IndyMac failed, in part, because billions were withdrawn when depositors learned that Sen. Charles Schumer (D-NY) wrote a letter expressing his concern over the bank’s health. It might have failed on its own, but Sen. Schumer and all the depositors hastened its failure.

Let’s say you just want to know how healthy your bank is… unfortunately the FDIC doesn’t list the banks on its watch list (known as its “problem banks” list). Publishing such a list would cause a bank run, though the bank itself might be safe and just need further scrutiny, and likely fail the bank, so they keep that list locked away.

The only two alternatives are the two most well known rating sites: Bauer Financial and Bankrate’s Safe & Sound ratings. Unfortunately, both are updated quarterly but they are your best bet for finding out what bank is in trouble besides scanning newswires for MOU leaks.

Please take my advice, keep your deposits under $250,000 and worry about something else.