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Minyan Mailbag: Is My Money Safe?


As debt crisis continues, more questions than answers.

Mr. Practical,

I just read Toddo's
The Bear Scare. I'm completely shocked at the pace with which Bear Stearns (BSC) failed, and am worried about my own savings. I currently have most of my life savings in Citigroup (C), and the amount is over the FDIC limit. Should I be worried at all? What are my options if it's not really feasible for me to have enough accounts at different banks so that all amounts are under the FDIC limit?

Thank you for your guidance,
Minyan George


If you call your representative they'd be hard pressed to give you a correct answer, probably because there really isn't one. Cash can be co-mingled, so you definitely don't want to have a money market account. FDIC insurance is for banks. SIPC covers broker-dealers. What they do is if the broker erroneously takes your securities in bankruptcy that are in your name they will sue for you in court to get them back. If the securities are in a margin account it becomes more difficult because then they essentially are using your securities as collateral and have a better chance of keeping them in a court battle.

The best thing to do is 1) not have a margin account and 2) hold securities, not cash in it. Keep the money in T-bills if possible.

Mr. P
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Posiitons in C, BSC
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