Financial Experts Advise Bank Customers to Diversify

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Since federal regulators took over their operations, most IndyMac banks have attended to long lines of waiting customers. Most people in those lines wanted their money, even if they hadn't figured out what to do after they withdrew it. KPCC's Brian Watt went looking for guidance.

Brian Watt: Ninety minutes before IndyMac's Santa Monica branch was set to open, actress Alex Donnelly showed up to stand and wait. She'd arrived much later on IndyMac's first day under the control of the Federal Deposit Insurance Corporation. On Monday, Donnelly waited two and a half hours without even getting close to the door.

Alex Donnelly: If the FDIC is this slow, what are we all thinking we're safe for? And, you know, this is probably one of many banks that's waffley. But, part of me wishes that Jimmy Stewart would come flying out the front door, and say, "Hey everybody! It's gonna be fine, you'll all get your money..."

Watt: But Jimmy Stewart's character from "It's A Wonderful Life" wouldn't be able to help Donnelly and others figure out what to do with their money once they got it. Financial experts insist that, rumors aside, most banks are solvent. The FDIC insures deposits of up to $100,000. For Encino tax attorney Robert Klueger, that's a good threshold. He specializes in helping people with that kind of cash protect their assets.

Robert Klueger: I'm not so sure it's wise to have more than a hundred-thousand dollars in any bank in the best of circumstances. But if times are not as good, it's certainly not prudent to put all your eggs in one basket.

Watt: In other words, Klueger says, diversify. Beyond that, counsels William Isaac, former chair of the FDIC, do your homework.

William Isaac: When a bank is paying extraordinary rates of interest, if it's, if it's significantly better than anybody else is paying, you really oughta ask why. If a bank is paying high rates, chances are decent it's doing some pretty risky things with the money.

Watt: All banks assume a degree of risk with depositors' money. They always have. Isaac told KPCC's Patt Morrison that the result isn't nearly as severe now as during the Savings and Loan Crisis that began in the 1980s. Then, he said, about 3,000 financial institutions failed.