How to deal with failed money market accounts and certificates of deposits

If you end up with a money market account or a certificate of deposit in a failed bank, it can get pretty disconcerting for you. This is because you will firstly not have access to the accounts if the bank fails and is taken over by the government or another bank. In such cases, most people end up writing off their investments as a loss since they might not be able to find out what has happened to the same.

Money market accounts are of different types. Some are money market deposit accounts and money market funds. Money market deposit accounts are FDIC insured. The FDIC or federal deposit insurance corporation will insure your investment up to a level of $250000. If the bank were to fall, you can retrieve the entire amount up to that limit.

The money market funds will have diversified investments under them. This can include short term certificates of deposits or even securities like treasury bills and bonds like corporate and government bonds. These investments are not FDIC insured and hence you need to be careful when you choose the financial institution that you want to go with.

If the bank fails and files for bankruptcy, you cannot do much. But if the bank is repossessed by another bank, you can get access to your funds after a week or so of the transition. This will be done only after the entire takeover process is completed and all the loose ends are tied up by the people on the board.

Those money market mutual funds that are not insured will work in a similar fashion to insured accounts. But the only difference will be the interest rates which will be lesser after the takeover. The waiting time which you will have to go through to regain access to your account will vary depending on the type of bank that has taken over your bank and also the circumstances under which the takeover happened.

Certificates of deposits are insured by the FDIC again up to a limit of $250000. The deposit will mature at the same time as promised in the initial arrangement. This is because the contract that you sign at the beginning will be bound by law and if the bank fails, the FDIC will give you the returns as per the stipulated time in the agreement. This is the reason why certificates of deposits are much better compared to other investment options when you are looking for safety and stability. But savings bank accounts would be the most stable if you are just looking for a stable and steady growth investment option. 

There was a time when banks going under were unheard of. But now with the global financial crisis, it is becoming more apparent that banks are not entities with unlimited resources and are susceptible to the moods of global financial enterprises. Hence it is important to invest in those options that will give you some back up in cases where the bank fails or entire financial systems fail.