A LIFE SAVINGS NEARLY LOST
Twelve
days after a bank closing in Hennessay, OK, in late 1985, only four FDIC
employees remained at the bank to complete a payoff. By then, there were no
more than a dozen uninsured depositors with whom we had not met. At noon, an
elderly woman walked into the lobby and was shown to my office. We got right to
business, and she explained that her husband had just retired after 40 years
with a local farmers’ co-op. The couple had four accounts with the bank—a
checking account with a few thousand dollars, a savings account with about
$10,000, and two Certificates of Deposit, each for $100,000. One CD was in her
name, payable upon death to her husband. The other was in her husband’s name,
payable
upon death to her. The bank had set up these two CD accounts so both
would be protected with FDIC insurance. I told the woman that the CDs would be
covered with FDIC insurance, but the other two accounts would not because they
were set up jointly with her husband. She and her husband were each entitled to
$100,000 of protection for the CDs, but they would lose the roughly $12,000 in
smaller accounts. The woman sighed at losing $12,000, then told me that her
husband had passed away on the same day the bank failed and she could not cope
with any more bad news. I was shocked at this revelation because I realized
that when her husband died, the CD in his name became her property. So, she was
probably going to lose the other $100,000, which only seconds before I had told
her was covered by FDIC insurance. I had no choice but to give her the bad
news. She became extremely distraught at the thought of losing more than half
of her and her late husband’s life savings. 307 (Anecdotes) The FDIC staff
decided to consult a senior attorney in Washington about the matter, who asked
the time of death. He explained that we were paying out funds based on the
ownership at 3:00 p.m. on the day the bank closed, so if the husband was alive
then, the insurance limits would cover both of them. I volunteered to call the
woman to find out the time of death. The phone rang and rang. Finally, she
picked up and I got the answer I was hoping for. Her husband had died at
10:15…p.m. So both CDs were, indeed, covered. I gave a thumbs up! --Robert C.
Schoppe.
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