You have a retirement account in a bank that has failed. The balance in your account is $330,000. Does it make a difference to you if FDIC uses the payoff method or the purchase-and-assumption method for resolving this insolvency? Explain.
What will be an ideal response?
It does make a difference. Under the payoff method, the FDIC simply pays off the depositors the balance in their account up to the legal limit, which is currently $250,000. You would potentially lose $80,000. Under the purchase-and-assumption method, the FDIC will find a firm to take over the failed bank and your account will stay intact.
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