Banks have patrons questioning

By HOLLY SCHOENSTEIN

In an informal poll, less than one-third of respondents knew what the FDIC does.

YOUNGSTOWN — Recent news about the closing of IndyMac Bank and the teetering of Fannie Mae and Freddie Mac have caused an increase in customer inquiries about security of their own accounts at some local banks and savings institutions.

Despite the increased interest, however, no one appears to be panicking.

Frank Paden, president of Canfield-based Farmers National Bank, said customers have called or stopped in with questions. The most common questions have been how deposit insurance works and whether Farmers could fail.

The federal government created the Federal Deposit Insurance Corp., an independent agency, in 1933 in response to wavering customer confidence in the American banking industry in the 1920s and ’30s.

If an FDIC-insured bank fails, customers’ deposit amounts are insured up to the coverage limit, which varies depending on the type of account.

But the FDIC’s first goal is to find another insured bank to assume the deposits. If one is not located, then the FDIC would write checks for the amount of the deposits up to the insurance limit — plus principal and accrued interest — up to the date of the bank’s closing.

Although the FDIC says it tries to issue checks within 48 hours of a bank failure, no formal time frame is included in the statute other than “as soon as possible.”

FDIC spokesman David Barr said it’s rare that customers would not have access to their money within a reasonable amount of time. The only instance that he can remember in the last 20 years in which customers did not have access to their money in a reasonable amount of time was the fall of First National Bank of Keystone in Keystone, W.Va., on Sept. 1, 1999; customers were able to access their deposits on Sept. 7.

Paden said Farmers branch employees have directed customers to the FDIC’s Web site when they have inquiries about what is covered and what is not covered.

“We saw no pattern that [the influx of customer inquiries] was going to be a major panic; it settled down,” Paden said.

Some customers have transferred money to other accounts at Farmers, but others have closed their existing accounts and opened new accounts at other financial institutions, he said.

Farmers also tracked the number of customers who withdrew large amounts of money, but Paden would not say how many did so.

Still, he said Farmers has not experienced the panic that some banking professionals had anticipated, and the turmoil that Y2K changeovers had created in the industry was greater than what Farmers has experienced so far with recent events.

Savings and loan banks are not the only institutions fielding customers’ questions about the security of their accounts.

Barbara Delauter, chief executive officer of Ohio Edison/Penn Power Credit Union Inc., in Youngstown, said it has received about 20 phone calls and a few walk-ins, mostly retirees, who have questions. The most common question has been regarding the deposit insurance coverage limit.

The National Credit Union Share Insurance Fund, which is a branch of the National Credit Union Administration, insures member accounts in credit unions. Congress established the agency in 1970.

Brochures have been available for Ohio Edison/Penn Power Credit Union customers as well.

Despite the attention that troubled banks and lenders have attracted, Paden said customers should not be worried.

“The banks in this current time right now, everyone has a different view of them,” Paden said. “But everyone has to remember that banks are here to service customers, and there’s no reason to have a lack of confidence in the banking industry.”

The Vindicator asked nine people in downtown Youngstown about the banking situation. About 20 percent of these people were concerned about the security of their accounts, but none had asked about insurance coverage. However, they planned to ask about it.

Youngstown resident Kyle Johnson, 20, was not aware of the recent news about some troubled financial institutions and was not concerned for the money in his bank account.

But Ray Hricik, 64, of Sharon, Pa., has heard the news. Still, he said he has not been concerned for his money.

hschoenstein@vindy.com