Having lived through the Great Depression, Ed Park is more than a little unnerved about this year’s financial turmoil. He remembers the bank closures then and said he and his friends are “scared to death” it could happen again.

But a big difference between now and then is the Federal Deposit Insurance Corp., which insures deposits in banks and thrift institutions for up to $100,000 per depositor per bank, and up to $250,000 for some retirement accounts.

Park, though, wants to close his Washington Mutual account amid recent speculation about its fate and transfer his funds to a new bank — even though he knows his money would be safe at WaMu.

“I’m old and lots of people I know are on Social Security and they are scared to death. They don’t know what to do and they don’t have any banking knowledge,” Park said. “Lots of us grew up in the Depression and there was no money, and when banks closed, you were out of luck. The FDIC was supposed to solve that, but when you grew up in that era, you remember it.”

On Monday, Treasury Secretary Henry Paulson said the country’s commercial banking system “is safe and sound” and that “the American people can be very, very confident about their accounts in our banking system,” according to an Associated Press report. Also, FDIC officials have said 98 percent of U.S. banks still meet regulators’ standards for adequate capital, the AP said.

Washington Mutual spokeswoman Darcy Donahoe-Wilmot said in a statement that WaMu, the nation’s largest thrift, has plenty of capital to weather the nation’s current financial crisis and that concern from some analysts that WaMu may be one of the next big financial institutions needing a bailout is unfounded.

“When the stock market is as volatile as it is today, people tend to associate the price of a company’s stock with its financial soundness, but stock price alone doesn’t determine the strength of a company,” Donahoe-Wilmot wrote.

Even though the company’s shares closed Tuesday at $2.32, down nearly 94 percent from their year-ago price of $35.96, Donahoe-Wilmot noted WaMu has $143 billion in deposits and access to an additional $50 billion from the Federal Home Loan Bank System and other sources.

“The company’s capital ratios remain significantly above the levels for well-capitalized institutions, and we’re confident that we have sufficient liquidity and capital to support our operations while we return to profitability,” Donahoe-Wilmot wrote.

WaMu reported a loss of $3.3 billion in its second quarter ending June 30, 2008, as it put aside more money for loan losses. Through two quarters this year, the company has recorded losses of $4.7 billion. That compares with a loss of $67 million in all of 2007 and net income of $3.56 billion in 2006 and $3.43 billion in 2005.

Failures

There have been several high-profile bank failures this year, including Pasadena, Calif.-based IndyMac Bank in July, the largest of 11 bank failures so far in 2008.

LaJuan Williams-Dickerson, an FDIC spokeswoman, said that 11 may seem high, but it’s still low considering the agency insures 8,491 banks.

“Keep in mind the late 1980s and ’90s, when there were hundreds (of failures due to the savings and loan crisis). So, relatively speaking, 11 is a very small number, particularly in this economic environment,” Williams-Dickerson said.

According to the agency, more than 1,600 banks insured by the FDIC were closed or received FDIC financial assistance between 1980 and 1994.

Federal law requires the FDIC to make payment to depositors if a bank fails as soon as possible. Historically, the FDIC pays insurance within a few days after a bank closing, either by establishing an account at another insured bank or by providing a check, according to the agency.

Should any FDIC-insured bank fail, its depositors are guaranteed insurance up to $100,000 per bank for their checking, savings and money-market accounts, as well as certificates of deposits. The $100,000 for a depositor is the total per bank and is not per account.

If a husband and wife have a joint account, each is entitled to up to $100,000 of insurance.

Stocks, bonds, mutual funds, life insurance policies and annuities, even if purchased from the insured bank, are not covered.

Certain retirement accounts, including IRAs and self-directed Keough plans, are covered up to $250,000.

Your account

Williams-Dickerson said that the federal Office of the Comptroller of the Currency regulates the nation’s banks. When the OCC deems a bank is failing, it closes the bank and names the FDIC as the receiver. The FDIC first tries to find a healthy insured bank to assume ownership of the failed bank’s accounts, she said.

When that happens, all of the failed bank’s accounts should work as normal, she said. Checks can be written, ATM cards can be used, and online activities such as bill pay and direct deposit should work unless specific circumstances prevent continuity, in which case the FDIC will address them, Williams-Dickerson said.

She added that the bank that takes over the failed bank’s accounts will generally issue its own account numbers 30 to 60 days afterward in order to integrate the customers of the failed bank.

“Certain details can change with banks, but depositors still have access through their ATM cards, debit cards, checks — there really is no interruption,” Williams-Dickerson said.

Making people whole

Depositors with assets of more than $100,000 are insured for $100,000. The remainder is noted and the depositor then becomes a creditor who is paid off after the FDIC liquidates the failed bank’s assets.

“We’re trying to make folks whole, but it depends on how much we get,” Williams-Dickerson said. “We’ve paid between 20 to 100 cents on the dollar.”

On its Web site, the FDIC states that in its 75-year history, no customer has ever lost a single penny of insured deposits.

The FDIC had roughly $45.2 billion in its Deposit Insurance Fund as of June 30, 2008, according to the agency. The DIF is funded by insured banks who pay premiums based on the balance of insured deposits as well as the degree of risk the institution poses to the fund.

The $45.2 billion in the fund is a drop of more than 14 percent from its first-quarter amount of $52.8 billion. The drop means the fund is now below the reserve rate of 1.15 percent of estimated insured deposits mandated by federal law. Accordingly, the FDIC is required to develop a plan to bring the ratio above 1.15 percent in the next five years. An Aug. 26 FDIC news release said it would likely do so by increasing premiums, especially for high-risk banks.

Bank failures

2008 11

2007 3

2006 0

2005 0

2004 4

2003 3

2002 11

2001 4

2000 7

1999 9

1998 3

Source: Federal Deposit Insurance Corp.

For more information, visit www.fdic.gov or call 877-275-3342.