Kansas Now - EP 005 - FDIC vs SIPC
2Kansas Now - EP 005 - FDIC vs SIPC
Kansas Now
Podcast Episode 5
FDIC vs SIPC
Air Date:
1/14/2025 - 6PM Central
Description:
Tyler Stansfield Jaggers discusses two specific types of insurance, FDIC and SIPC.
These terms stand for FDIC which means Federal Deposit Insurance Corporation.
And SIPC which means Security Investor Insurance Corporation.
These terms are often brought up when people are discussing things like Savings accounts and Brokerage / Money Market Accounts.
Tyler goes over how FDIC insurance is backed by the DIF or Deposit Insurance Fund.
Accounts that have FDIC insurance are not protected by changes in investment conditions and errors and identity theft etc.
FDIC focuses on protecting deposits from where the Banks themselves fail due to things like bank runs etc.
A person mismanaging their own resources is not protected by FDIC, it is there to make accounts whole when a bank does not have the resources to guarantee its deposits.
SPIC is the Security Investor Insurance Corporation and it primarily deals with accounts that are related to brokerages.
But lately there are accounts with high interest rates that seem competitive with High-Yield savings accounts.
But SPIC is more of a membership organization that is related to the Security and Exchange Commission.
Brokerages pay dues and have an account that can help when one of the brokerages fails and customer accounts are at risk beyond normal market conditions.
SPIC insurance does not help with identity theft, customer fund mismanagements etc. it focuses primarily on customer accounts when a brokerage has a serious issue fulfilling its obligation.
The main difference between SPIC and FDIC is that FDIC has more access to draw upon the US Government's Financial Resources in an emergency.
Although SPIC insured accounts can borrow from the Treasury via a line of credit during an emergency, it has a smaller working fund than the FDIC as well.
Tyler also discusses the concept of a bank-run and how the FDIC is designed to increase financial system confidence.