Loan Think

If the U.S. Defaults on its Debt, What About Deposit Insurance?

Published July 11, 2011, 12:01 p.m. EDT

1 Min Read

If Democrats and Republicans cannot reach a debt ceiling agreement by August 2 another financial calamity may be right around the corner: deposit insurance. Follow my logic here: A default by the U.S. means Uncle Sam no longer stands behind its obligations – which also means deposit insurance that is guaranteed by the Federal Deposit Insurance Corp. is worthless. Of course, the FDIC has money held in reserve but after financial markets crash on August 2 and 3 that money will quickly evaporate as worldwide ‘runs’ cause half our banks to crash and burn…

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