Question:

What happens to the stocks and mutual funds held at a bank that goes bankrupt?

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I have a good size portfolio held at the brokerage arm of a major bank that is looking like it is going under. Are these holdings transfered under receivership or buyout? I'm getting worried here. The bank sounds like "walk over ya".

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  1. Well at least its not the banks money since you invested in other avenues. If the bank goes bankrupt the fed will step in. You might just want to transfer your accout to a brokerage firm, you might like td waterhouse.


  2. ONLY central banks and their deposits are FDIC insured. Mutual funds, money markets, and stocks are not, even if through a central bank. Nor are deposits in an investment bank or broker, like Bear Sterns, or the discount brokers.

    The Fed stepping in for Bear Sterns was the first time the Fed stepped in to help an "investment" bank that was NOT a central bank.

    BUT they are YOUR stocks and mutual funds and they will be transferred.

    There is one exception though and that is stocks held in a margin account. Stocks in a margin account are under a different agreement and the brokerages use your stocks to sell options against them. In order to sell an option  "somebody" must actually own the stocks.

    THOSE stocks are at risk in a brokerage failure and many people don't know this.  But brokerages do carry insurance against such risks.

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