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Letters: Community banks safe and sound

Community banks safe and sound

Recent news reports and commentaries have raised concern about the safety of deposits in community banks. These reports are irresponsible and wrong. These are the facts: community bank customers' insured deposits are safe. No one has ever lost a penny of deposits insured by the Federal Deposit Insurance Corp. (FDIC) held in community banks.

Let's also set the record straight on the condition of the banking industry. The federally insured and regulated banking industry is not in a crisis. Capital is at historic highs. Banks use their capital and their loan loss reserves as a buffer against any potential operating losses. As of March 2008, the industry held $1.36 trillion in capital, plus $120.9 billion in reserves.

It is true there are challenges in today's economy. Some banks will fail. But so far in 2008, seven banks in the United States have failed. Hardly a "crisis." That pales in comparison to the hundreds of bank closings during the height of the Savings & Loan crisis in the late 1980s and early 1990s. There truly was a crisis at that time, yet no FDIC insured depositor lost a cent!

When a bank failure occurs, FDIC insurance covers your account in a commercial bank, thrift or a savings bank. Your individual account in an FDIC insured bank is protected up to $100,000, with additional protection for joint accounts. Your retirement account is protected up to $250,000. Look for the FDIC sticker on the door or lobby of your bank. Contact your banker if you have questions about the specifics of how FDIC insurance works.

Sometimes the FDIC insurance fund is falsely portrayed as the equivalent of a federal government bailout. The banks and thrifts that benefit from FDIC insurance protection pay for that protection through FDIC insurance premiums. Currently, the FDIC insurance fund contains more than $52 billion in assets to protect depositors like you.

This economic slowdown will pass, as all the others have. Know that your local community bank is open for business, doing what it does best: helping meet customers' financial needs, building strong communities and providing a safe place for your money.

Mark Hewitt, Chairman. CEO

Northwoods Bank of MN

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