The article claims the bank's losses were insured by the federal government, yet it closes by saying some people that banked there are having financial trouble.
How's this work? Aren't the bank's losses essentially people's deposits? Where'd the insurance money go then, or has it simply not yet been paid out?
FDIC ensures certain deposits, within limits. If the bank fails, which is my superficial understanding here, FDIC will make you whole if you had a secured deposit within those limits, although not instantly, but it doesn't cover deposits either beyond those limits or which were never guaranteed. A typical high street bank account is always covered, but maybe you've put the $1.5M Grandma left you in there, that's too much, or maybe instead of the normal bank account you obtained some weird investment vehicle that's not technically a bank account but, you know, it's from a bank - well, the paperwork did say "Not FDIC insured" and sure enough it isn't FDIC insured so if the bank fails too bad.
In most bank failures a large fraction of the money is eventually recovered but it takes ages. Maybe you had $1M with a bank, the bank fails on Monday, $250k is FDIC insured, on Monday you can't get your money, this can be very disruptive. Can't make car payment, can't pay tuition, whatever. But hey by first thing Wednesday FDIC gives you access to $250k.
Six months later the people cleaning up the mess maybe give you $607 283 from selling the bulk of the bank's assets, and then six years later, when you've almost forgotten this disaster, you get a letter with a further $114 384.10 as the last bits and pieces were settled, and it turns out one of the hard to unwind bank investments was actually quite profitable, although it was supposed to pay much earlier. Congratulations, the vast majority of your money was "recovered". Not all of it, and not quickly, but bank failures generally do not mean there's an empty vault.
I understand that, except the reported insured amount matches the reported amount of money lost in the scam, so as much as it adds up, it doesn't square with the rest of the article.
Apparently, it takes some time until the money is paid out.
From the article:
> Right now, it's unclear how or when victims will be repaid for losses. Broomes ordered "that restitution be finalized at a separate hearing within the next 90 days," the US Attorney's Office said.
The FDIC insures deposit accounts (savings, checking, money market deposit accounts, and certificates of deposit) only and there’s a cap of $250K at any single institution. I’ve no idea what accounts this bank offered, but anything in excess of that cap or held in, for example, mutual funds, stocks, etc are uninsured losses. Those people the article mentioned specifically called out retirement savings, so they very well may not have been in insured deposit accounts.
I replied elsewhere but he didn’t just steal from the bank: “ After blowing through his own funds seeking promised profits, Hanes stole tens of thousands from a local church, then a local investor club, and finally his daughter's college fund, NBC News reported.”
How's this work? Aren't the bank's losses essentially people's deposits? Where'd the insurance money go then, or has it simply not yet been paid out?