Troubled banks 101

It's a scary time for bank customers. But most accounts are safe. Here's what you need to know.

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NEW YORK ( -- Bank failures are scary - especially during these times of economic distress.

Washington Mutual, once the nation's largest thrift and rocked by bad lending on real estate, had been reportedly teetering on failure. On Thursday regulators seized the bank and arranged a takeover by JPMorgan Chase.

And experts and banking regulators say that the number of failures is likely to pick up pace in coming weeks and months.

It all leaves Americans wondering: Is my bank safe?

The bottom line is that the vast majority of the nation's 8,500 banks are in good shape, and when banks do fail, customers rarely lose money because most deposits are insured.

Here is what you need to know.

Essentially, the FDIC insures deposits in several "ownership categories," which means you may actually be insured beyond the $100,000 limit you most often hear about. For example, single accounts in your name are covered up to $100,000 per bank. Joint accounts are a separate category and also get their own $100,000 of coverage per person per bank.

So if you and your wife have a joint savings account with $300,000 in it, $200,000 of that account is insured. Retirement accounts - which must be an actual retirement account, such as a IRA, SEP, etc., not just an account you consider part of your retirement savings - are covered for up to $250,000.

These limits apply only to bank deposits, however, which include checking, savings, money-market accounts, CDs and certain trust deposit accounts. It does not apply to other investments you may buy at the bank, such as mutual funds or annuities (which are covered in the Insurance section below).

But just because mutual funds aren't covered by FDIC insurance does not mean you would lose the money you have in mutual fund that you bought through the bank if that bank failed. Mutual fund assets are not part of the bank's assets - they're held in separate accounts - so they don't even come into play when toting up the bank's assets and liabilities.

As for the value of any mutual funds you acquired through a bank, that would be determined by the market value of their underlying securities, the same as any other mutual funds.

One caveat: if you invest in a bank money-market account, that money is covered by FDIC insurance, since that account is a bank deposit. If, on the other hand, you buy a money-market fund at the bank, that's not covered by FDIC insurance since a money-market fund is a type of mutual fund.

For more details on bank deposit insurance, check out Money Magazine's advice from Walter Updegrave. Or visit the Deposit Insurance section of the FDIC's web siteTo top of page

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