I admit, Im a little ignorant on this subject.An interesting read,
Although few depositors realize it, legally the bank owns the depositor’s funds as soon as they are put in the bank. Our money becomes the bank’s, and we become unsecured creditors holding IOUs or promises to pay.
In general, unsecured creditors, such as depositors of a bank, will have very little redress to cover their debts if a company is put into liquidation. The courts will not deal with the question of which class of creditor should have priority over other classes in such circumstances.
In the case of banking, it indicates the limited responsiblity of a bank towards depositors once the bank has the money put into its account. The principle illustrates that the relationship between the depositor and the bank is not one of principal and agent, where the bank as an agent acts on behalf of the principal and their interests. The money deposited in an account is no longer deemed as belonging to the principal but rather to the bank.
The money paid into the banker’s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself. (Banking Regulation of UK and US Financial Markets – By Dr Dalvinder Singh)
Can you site an example where a depositor had all their money seized, and not in a case of when a bank failed?
I only deposit in a bank thats insured through FDIC.
I have never had an issue, nor has anyone I know of.