What will happen if my bank goes bankrupt?
Your brokerage account is insured by SIPC to $100,000. And, your stocks, bonds and other traded securities are yours; the company is simply acting as a custodian and holding them on your behalf. Note that SIPC covers fraud committed against you by your broker; it’s not really the same thing as FDIC insurance on your bank account! That being said, let’s say your brokerage account at E-Trade contains ten shares of XYZ stock, each valued today at $10. If the brokerage goes under tomorrow, you still own the stock — it’s in your name — but you have no guarantee as to its value! If it takes the government two months to sort out the accounts and transfer your information and holdings over to NewCompany, you’ll still own the ten shares, but if in those two months during which you had no access to your holdings their value has declined to $5 a share, well, that sucks for you. The white knight [bank] assumes the full liabilities and covers them 100%, even if they exceed FDIC guidelines. While
