Deposits in commercial banks are not at risk

Individual bank accounts are insured by the Federal Deposit Insurance Corp.

NEW YORK (AP) — The credit crisis has done more damage on Park Avenue than on Main Street, but the near-collapse of investment bank Bear Stearns raises the question of whether Wall Street’s troubles could spread to commercial banks and ordinary depositors.

The short answer is this: Deposits in commercial banks are considered safe, barring catastrophe, and they are protected by federal insurance if a bank fails.

“The average guy on the street has nothing to worry about,” said Gerard Cassidy, a banking analyst at RBC Capital Markets. “There should be no panic whatsoever.”

Individual bank accounts at a single institution are insured by the Federal Deposit Insurance Corp. up to $100,000, including checking and savings accounts, trusts and IRAs or certificates of deposit. Some retirement accounts are insured up to $250,000.

Accounts at Bear Stearns, an investment bank that does not cater to consumers, are not insured by the FDIC. But JPMorgan Chase Co., which plans to buy Bear, has assured Bear’s customers it will guarantee all the bank’s business. If Bear were to fail, customers of failed brokerages are protected by the federal Securities Investor Protection Corp., which can restore investor assets.

If you have more than $100,000 in a commercial bank, you can get coverage a couple of different ways, including by simply opening accounts at other banks.

Commercial banks would have to fall far before they match the 1991 recession, when 502 banks failed in three years.