Do you lose money if your bank fails?

The Federal Deposit Insurance Corporation (FDIC) has protected bank deposits since 1934.

In all that time, no one has lost money that was FDIC-insured. Federal deposit insurance covers
most types of deposits, including savings deposits, checking deposits, and certificates of deposit.

The basic insured amount is $100,000.

In the days before federal deposit insurance, the U.S. banking system was plagued by bank
“runs” or “panics.” At the slightest hint of trouble, depositors would run to the bank and line
up to withdraw their money. All too often, only the first few people in line had any hope of
ever seeing their money again; others lost everything. Even healthy banks sometimes failed after
rumors caused depositors to panic and withdraw their money.

For many years, the public seemed willing to accept the losses. But then came the Great
Depression of the 1930s, and financial pressures forced thousands of banks to close their
doors forever. Losses ran into the hundreds of millions of dollars, and many people lost their
life savings.

The wave of bank failures shattered public confidence in the banking system, and Americans
looked to the federal government for help. Congress responded by establishing the FDIC,
which provided deposit insurance coverage of up to $2,500 per depositor. Public confidence
rebounded, and bank failures declined from approximately 4,000 in 1933 to 62 in 1934.

Over the years, the federal deposit insurance limit has increased, and federal deposit insurance
has helped to maintain public confidence in the U.S. banking system. Bank failures have not been
eliminated, but long lines of panic-stricken depositors have become an uncommon sight.

Source from : http://www.bos.frb.org/