Listen to Lawrence…FDIC Protection Explanation

June 17, 2020


Dear clients and friends,

I want to share an email with you I received this week from one of my readers:

Hi Mr. Davidow,
A note of thanks for providing your “Listen to Lawrence” emails during the COVID 19 pandemic. Your thoughtfulness and insight to very important issues and questions have been appreciated and hope will be continued. We are extremely glad to see you are “opening” your office and offering communicating alternatives.

God bless you, your family and staff.


I just want this reader, and the many others who have sent me similar kind thoughts, to know how appreciative I am for your kind words. The truth is that I get as much as I give with these emails. I feel we have been on this pandemic journey together, supporting each other week after week. Each week’s questions and answers and reports on new laws have only deepened the connection for me. Rest assured that these LISTEN TO LAWRENCE emails will continue into the future. Please send me more of your questions so I know what’s on your mind these days. Thank you so much!

AND NOW….. here is one of your questions and my response:


Hello Lawrence. I thoroughly enjoy reading your answers to questions and learn much from them. My question is from a person who probably reads too much and believes everything she reads! Anyway, my husband and I have an irrevocable trust with your firm, but left a considerable sum in our bank . So my question to you is, can banks legally take our money if the economy worsens or not let us withdraw it? My husband thinks I’m crazy to ask you. Should we be taking that money out now?


I think we can all understand that this pandemic makes people worry about their lives AND their money. But I also think that if you have money in the bank right now, that keeping it there may be the safest place for it.

I am not a financial planner and my response has nothing to do with HOW you should invest your money. Instead, my response here is focused solely on the safety of leaving money in the bank.

This was a problem during the Great Depression of the 1930s when there was a run on bank deposits. Basically, people panicked and withdrew their money far in excess of the reserves banks held. The banks failed and people lost their money. The federal response was to create the FDIC so this won’t happen again.

The bottom line is that as long as your money is held at a government-insured bank, you will be fine and you can sleep well at night. The Federal Deposit Insurance Corporation (FDIC) insures all bank deposits of up to $250,000. If you happen to have more than $250,000 in cash, you can open multiple accounts and distribute the funds across each. Once the money leaves the bank, your protection is gone.

So, what would actually happen if your bank went under? Your bank would immediately be taken over by the federal government (banks do not go into bankruptcy). This could all happen on a Friday night and by Monday morning your local branch would be operating again, perhaps under a different name. It would feel like nothing happened. The FDIC would then either find another bank to buy the failed bank or operate it themselves until they find such a buyer.


I hope this helps.

Please forward this email to your friends and relatives.

As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.

Let’s stay connected.


Stay safe!