Investor Confidence Down Despite Assurance From FDIC U.S. Banks Are Safe

July 15, 2008 12:42 p.m. EST

Washington, D.C. (AHN) - Despite an assurance from the head of the Federal Deposit Insurance Corporation that American banks are safe from closures, investor confidence continued to be on the wane.

The lack of confidence was reflected in the 35 percent decline in the shares of Washington Mutual, the nation's largest savings and loan bank. Trading of its shares was even temporarily halted in National City due to panic selling, while its shares plummeted to a 24-year record low.

At the branches of reopened IndyMac Bancorp, queues were formed as early as 4 a.m. of Monday as investors withdrew their money from the bank, the third largest in U.S. history to fail.

But federal regulators insisted IndyMac's case was an isolated one and most of the country's 8,500 banks are financial stable. In addition to the sound financial standing of the country's banking system, bank accounts are insured of up to $100,000, said Sheila Bair, chairwoman of the FDIC on a CBS show.

Bair pointed out, "We've had five banks closing this year... I won't say that banks don't have challenges right now. They do. But no insured depositor has ever lost a penny of insured depositis throughout the FDIC's 75-year history."