What happens to the money over the FDIC limit when a bank fails?

Question

I had about $4-5K at Countrywide Financial and when it became bankrupt. I recovered all my money thanks to the FDIC. I didn't encounter any problems when recovering the money, but that was probably because I was far under the FDIC limit.
I wonder what would have happened to my deposit if it had been above the FDIC limit of $250K. If I had $300K in deposits when the bank failed, would I have lost $50K? If the FDIC recovers the bank's assets, will those assets be used to pay depositors who were above the FDIC limit?

mhoran_psprep · Answer

The US Government tries to get another bank to take over the failing bank before it completely collapses. It avoids the situation where the FDIC would have to completely replace the depositors money. The customers of the failing bank become customers of the combined bank. The FDIC only has to address any shortfalls.
Lets say the bank is worth $900 Million and the total deposits that are either under 250K or maxed out at 250K equals $875 million and the excess deposits are $25 Million. Then everybody is made whole.
Now lets say the bank is worth $900 Million and the deposits that are either under 250K or maxed out at 250K equals $975 million and the excess deposits are $25 Million. The FDIC kicks in $75 million, people who have excess deposits will lose money. When their account is moved to the new bank they will not have all their funds. In your case there will not be $300K there will be $250k.

Fattie · Answer

"When banks fail" is an Extraordinary Circumstance outside of the rulebook.
There's simply no answer...
In such times, politicians completely ignore the "rulebook" and grab expediency.
History shows this Every Single Time.
If it happened in our milieu, without a doubt the same thing would happen: politicians would completely ignore the "rulebook" and grab expediency.
This has been proven to be the case 100s of times. It will happen again. Just the same.

What happens to the money over the FDIC limit when a bank fails?

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