How to Guarantee Your Bank Deposits Up to $50 Million
By Dr. Steve Sjuggerud
September 30, 2008

Isn't it worth it to have ALL your bank deposits guaranteed by the government?

I think so. And I showed you how in the March 18 issue of DailyWealth. Of course, back then, nobody was really worried about banks failing.

But today, bank failures are all over the news. So let's follow up with more ways for you to protect your bank accounts...

1. GUARANTEE all your cash, up to $50 million.

I believe the government, at minimum, will back the $100,000 FDIC guarantee, regardless of the number of bank failures. But what most people don't know is they're not limited to just $100,000 in FDIC coverage.

Today I'll explain a nifty way to cover yourself completely... to leave the government – the FDIC – holding the bag for all your cash if your bank fails. You earn a little less in interest for this guarantee, but you have no worries at all. Here's how it works...

Let's say you have $1 million. Now let's say you deposit that $1 million with a CDARS bank (that stands for Certificate of Deposit Account Registry Service). That bank keeps $100,000 of it, to stay within the FDIC limits. Then it deposits the other $900,000 in 90-day CDs at nine or more other banks.

Smaller banks like this program because it allows them to get deposits from all over America... deposits they couldn't possibly get on their own. In essence, smaller banks end up "sharing" big deposits with each other through CDARS.

CDARS was founded by three guys: the former chief of staff for the FDIC, the former comptroller of the currency, and the former vice chairman of the Federal Reserve's Board of Governors. Here's the website: www.cdars.com.

A longtime friend of ours... EverBank (www.everbank.com)... is part of the CDARS system. It calls its way to use the program "Insured Advantage CDs."

With CDARS, the FDIC insures your total $1 million. And the beautiful part is, you receive a single statement.

2. Determine if your deposits are within coverage limits.

Again, most people think you only have $100,000 in FDIC coverage... But they don't know exactly what that means. What if I have a joint account? Yes, that's $200,000. What if I name the accounts differently or switch the names around? Sorry, that doesn't work.

What if... and what if... Look! If you want to know how insured you are, use "EDIE" at www.fdic.gov/edie.

If EDIE says you're above the limit, and you don't want to do the CDARS thing to spread your deposits around, then you must:

3. Find out your bank's rating.

How do you know if your bank is safe? You can check your bank's "Safe and Sound" rating here: www.bankrate.com/brm/safesound/ss_home.asp. You might be unpleasantly surprised.

Four stars is a good rating. If it's a one-star or two-star bank, seriously consider moving those assets to "higher ground."

4. Stay within "The Club."

"The Club" has no official members... but it's obvious JPMorgan and Citibank are in The Club. The government organized JPMorgan's buyout of Bear Stearns. And it had a hand in Citibank's takeover of Wachovia.

So Bear Stearns and Wachovia were clearly not in The Club. They were not important enough... they could fail. But JPMorgan and Citibank are in. And I assume so are Warren Buffett-related businesses... which now include Bank of America, Goldman Sachs, and giant Wells Fargo.

I have cash at Bank of America. I think it's in The Club. I believe the government will protect assets in The Club at any cost. And it will likely sacrifice others to protect The Club.

5. Be skeptical... not excited... by high yields.

Just before Wachovia went under, it was offering high rates on deposits and CDs. It needed the deposits to stay afloat. For your deposits, focus on safety... as I described above... over high yields.

6. The most important thing you can do right now is ACT!

Are Your Bank Deposits Now at Risk? How to Make a Safe 38% While Wall Street Goes Haywire

Don't be hesitant. Don't hope nothing bad will happen to you. All the solutions I mentioned today are easy... So don't sit and wait.

In the end, you may decide you're fine where you are, that you don't need to do anything. But you'll at least have the peace of mind knowing your bank is safe... and so is your money.

Good investing,

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

Sign up today to read more investment ideas from Steve Sjuggerud.

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