I recently read in a newsletter the following assertion: ". . . the banks are saying'Keep good records, i.e. account statements, deposit slips, cancelled checks, etc.,' when all the time they know that, 'The FDIC uses the deposit account records of the institution to identify the owner and their right and capacity to which funds are held.' In other words, your records have no legal standing for proof of how much money you have in the bank for settling your account with the bank or the FDIC."

The writer then points out that banks don't keep money for you, they keep computer records of your money for you and, because of the fractional reserve system, they have little or no money to give you should you demand it. If their computers crash, kiss your money goodbye, bank statements, cancelled checks and deposit slips notwithstanding.

My question: can anyone verify the lack of legal standing of one's personal banking records? If so, would it also extend to other financial records such as mutual funds, broker statements, and any other financial assets held in book-entry form as opposed to certificates (such as stock certificates or bearer bonds)?

-- Al Saxton (alsaxton@snowcrest.net), September 07, 1999

Answers

In 1985 (not so long ago!), several savings and loans institutions in Ohio went bankrupt during the now-forgotten S&L crisis. The depositors were insured by FSLIC, which seems to function in much the same way as FDIC. The depositors received all their money (at least up to the maximum of $100,000), but it took a year -- during which time they were only allowed to withdraw up to $1,000 per month from their frozen accounts.

So one of the issues to keep in mind is whether you need fast access to your cash, or whether it's a long-term savings account.

In recent years, we've had a VERY small number of "ordinary" bank failures, and in most cases, the accounts were transferred to another bank overnight, or over the weekend, so that depositors saw little, if any, disruption in their ability to access their accounts. However, if a larger number of banks were to fail at the same time (whether because of Y2K or anything else), it's reasonable to assume that it would take longer for the FDIC to sort things out. It might only take a month, and the government officials would probably regard that as pretty responsive, but it could be a real nuisance for those who had no spending money for that month-long period.

Ed

-- Ed Yourdon (HumptyDumptyY2K@yourdon.com), September 13, 1999.

If you have a lot of money and are prepared to pay a lawyer about $100 bucks an hour....you can probably fight your way to get it back.

-- Thom Gilligan (thomgill@eznet.net), September 07, 1999.

Jay Golter, acting president of the Northern Virginia Y2K Community Action Group (NOVA Y2K) and a researcher at FDIC, is very confident that FDIC will get you your money in a few days in the event that your bank fails. Now, he lurks on the TB2000 forum. You might address this question personally to him in the title and see what else he has to say. Keep in mind that Jay Golter is not an end of the world doomer.

Sincerely, Stan Faryna

-- Stan Faryna (info@giglobal.com), September 07, 1999.

If only a few banks fail in 2000, the FDIC will be able to reimburse the depositors, but Y2K doesn't threaten only a few banks, it threatens all of them at the same time. If the banking system goes down for any length of time, all the paper records in the world won't get your money back because the ability to effect this will no longer exist. In a global banking collapse, all your paper recoreds will be good for is starting a fire to keep you warm.

-- cody varian (cody@y2ksurvive.com), September 07, 1999.

Also, legal standing is of no use whatsoever if the banking system crashes. When perhaps 90% of the wealth in the country evaporates (because it exists as debt, primarily, and in the form of digital promises to pay) there is simply no way to magically get it back. Your question suggests that you don't yet comprehend the totally devastating threat of y2k.

-- cody (cody@y2ksurvive.com), September 07, 1999.

First of all, let me say that I am not an attorney and the following is a worthless lay opinion and not to be construed as legal counsel. (e.g. go see a real attorney for a real answer and I am not practicing law - lol.)

As far as I understand law, PEOPLE have legal standing - not records. The correct question is probably whether you will have any legal standing in a contractual matter of insurance between the FDIC and its insured, (which I believe is the bank, not you.) As you are not a party to the contract, (just the FDIC and the bank,) I would assume you have no "standing" in matters pertaining to the contract. You would, however, have legal standing should you chose to sue the bank, as you are a party to a contract with them through your account.

The other question would be whether your records would be acceptable to the court as evidence. As you have no "standing" in the FDIC matter, your records would be irrelevant. However, if you chose to sue your bank regarding a dispute over their transactional record, I would assume your records could be submitted as evidence.

-- marsh (armstrng@sisqtel.net), September 08, 1999.

I worked in a bank several years ago and I believe FDIC stands for Federal DEPOSITOR's Insurance C??? and that each depositor's funds are insured up to $100,000 per banking instutition. Whether or not we'll be able to make a claim upon that insurance remains questionable, but I would still recommend keeping copies of your statements along with cancelled checks and deposit slips.

These records may wind up being useless, but I'm sure a judge (if we would even have the luxury of proving our case) would put a lot more value on your documentation than your word.

-- Kimberly Hott (ckhott@urec.net), September 08, 1999.

Al: Go here to read about FDIC coverage: http://www.fdic.gov Among other things of interest on that website, you will find the following in their FAQ items:

"7. How does the FDIC determine ownership of funds?

The FDIC presumes that funds are owned as shown on the "deposit account records" of the insured depository institution. If the FDIC determines that the deposit account records of the institution are unambiguous, those records are binding on the depositor. No other records are considered in determining legal ownership.

Generally, the FDIC will not recognize a fiduciary relationship (e.g., trustee, agent, nominee, guardian, executor, custodian, or conservator) unless the relationship is specifically disclosed in the deposit account records. Also, the details of the fiduciary relationship and the interests of the parties in the account must be ascertainable one of two ways: either from the deposit account records of the depository institution or from records maintained in good faith and in the regular course of business by the depositor, or by some person or entity that has agreed to maintain records for the depositor.

8. What are "deposit account records"?

The "deposit account records" of an insured depository institution are account ledgers, signature cards, certificates of deposit, passbooks, and certain computer records. However, account statements, deposit slips, items deposited, and cancelled checks are not considered deposit account records for purposes of calculating deposit insurance.

-- Norm Harrold (nharrold@tymewyse.com), September 08, 1999.

"If the FDIC determines that the deposit account records of the institution are unambiguous, those records are binding on the depositor. No other records are considered in determining legal ownership."

If the records were unambiguous, Y2K would be moot, right? So this rule is not applicable in a Y2K situation. Which doesn't mean they won't apply it...

-- T the C (tricia_canuck@hotmail.com), September 13, 1999.

Gary North's latest post said records are not legally binding and that you can email him for the latest proof. It's free info. Just type subscribe.

-- Raymond (kcorner67@hotmail.com), September 13, 1999.

The FDIC uses the bank's records because your statement balance contains information that is not current. Your account is constantly having checks and deposits posted, so your statement balance is your bank balance the day of your statement only. What if you had $10,000 and took most of it out the day before a bank failure. Do you think the FDIC would honor your bank statement balance or the balance at the bank? Of course it is going to use the bank's balance. That is all the FDIC means when it says bank records. Nothing sinister or paranoid about it. Your checkbook balance and the bank's balance never matches either because you have written checks that have not cleared the bank. That is why you have to reconcile your statement each month. The balance of your account in the bank on any given day is your bank balance - not your statement balance and not your checkbook balance. Bank signature cards, at least at my bank, are filed alphabetically in a file in our vault. They are not going to magically disintegrate 1/1/00 because of Y2K. Get a grip people!!

-- D. Yellets (ryellets@cwv.net), October 13, 1999.