FDIC reins in troubled banks

"The advice we've been providing to clients is to immediately check the (FDIC's) national rates, then they'll know if they have a problem. They could be looking at The Wall Street Journal every week and saying, 'We look good, or we checked Bankrate and we're way below those (rates).' For all we know, the FDIC may be very lenient in terms of allowing different local market rates. But it seems like they really prefer that banks comply with the national rates," says Shumaker.

Brokered deposits a problem?

Over-reliance on brokered deposits has become a common thread in many of the recent bank failures, according to the FDIC. While consumers enjoy easy access to CD yields that may not be available at their local banks, the institutions that are paying those higher rates may be doing so because they're desperate for cash.

BancVue, the Austin, Texas, company that makes another high-yield product that's popular with consumers, says its checking accounts aren't contributing to bank failures.

REWARDChecking, typically available at community banks, is a no-fee checking account that currently pays about 3 percent to 4.5 percent to customers who can abide by requirements such as using a debit card a certain number of times each month, having a check directly deposited to the account and receiving statements electronically.

BancVue CEO Gabriel Krajicek says comparing REWARDChecking to brokered deposits is like night and day.

"Our accounts generally don't make up more than about 10 percent to 15 percent of the total deposit base. Brokered deposits can represent a big chunk of a bank and they can really get stuck living hand-to-mouth with that hot money. Our accounts represent a real customer relationship that's generating a lot of noninterest income as well as cross-sale opportunities, which also can generate fee revenue," he says.

For consumers there is little danger in buying FDIC-insured brokered CDs through well-known financial institutions. FDIC-insured high-yield checking accounts also present little, if any, risk. The one caveat is to always stay within the insured limits.

An easy way to gauge the financial health of your bank is to use Bankrate's Safe & Sound feature. Keep in mind that we are in an economic climate where an institution's financial health can appear to head south very quickly -- a bank that looks OK one quarter may slip to a subpar rating the next. Staying within the insured limits is the only way to truly protect your deposits.

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