When a bank fails, where does the excess money go?

Question

A personal account only has FDIC insurance up to 100k. So when someone has more than that in their account. Lets say 500k where does the 400k go when the bank is closed by the FDIC? Because, if they had more than 100k in one account they are not going to get any of it back thats over 100k. So thats my question, where does it go and who gets it?

Answer 1

The bank does not hold all of the 500k and wait for you to come get it.  It holds the minimum amount required by the Fed and loans the rest out to individuals and businesses.  It pays you a pathetic interest rate of say .25% and lends it out at 7, 10, 12 %.  The government pays the 100k (meaning you and me as taxpayers) and the other 400k is lost because it was distributed out as loans.  The govt absorbs all the risks while getting none of the rewards in the bank boom times.  So the answer to your question is the rich banker's pockets.