Pain Continues on Wall Street as Lehman Goes Bankrupt, and Merrill Sold to BofA

To stay afloat, the company is looking for $40 billion in emergency funds, possibly from the Federal Reserve, and plans to sell off some assets. The insurer has already raised $20 billion in fresh capital this year.

All of this is aimed at preventing a credit-rating downgrade that would make it more costly to borrow and only compound the already-weakened firm's health.

Is Your Savings Account Safe?

It has not been a good year for banks. So far, 11 banks have failed and had to be taken over by the Federal Deposit Insurance Corp., or FDIC, the largest being IndyMac.

To put that in perspective, there are nearly 8,500 banks nationwide covered by the FDIC.

But all it takes is one big failure to throw the system into turmoil. So far -- with the exception of IndyMac -- this year's failures have been small, regional banks with minimal impact on the overall economy.

Now, there is concern about the future of Washington Mutual, which holds many mortgages that are expected to fail. The largest savings and loan has seen a doubling of defaults and has many outstanding adjustable-rate mortgages that are due to reset to a higher, harder-to-pay rate shortly.

In July, the bank reported a $3.3 billion loss for the second quarter. Since April, the bank's share price has plummeted about 75 percent from $13.15 to around $2 today.

If Washington Mutual goes under, most customers would be protected by the FDIC insurance. But such a failure could wipe out the remaining balance in the bank-funded FDIC insurance pot. If that were to happen, the FDIC would turn to the U.S. Treasury for more cash to protect depositors. Individuals with money in troubled banks would, for the most part, be safe but taxpayers could end up footing the bill to protect those deposits.

Bank Deposit Insurance

The FDIC protects deposit accounts including checking and savings accounts, money market deposit accounts and certificates of deposit up to the federal limit. The insurance does not cover products such as stocks, bonds or mutual funds, even if they are sold by your bank.

The basic insurance protects up to $100,000 in deposits at each institution for each kind of ownership category. That means one individual could be insured for up to $100,000 for a single account and another $100,000 in a joint account with a spouse or somebody else.

There is also a separate $250,000 insurance limit for various kinds of retirement accounts, including IRAs, Section 457 plans and Keogh plans.

The kind of account or bank branch makes no difference when calculating the insurance limit. The insured amount is not doubled by opening both a checking and savings account at a single bank or opening accounts at separate branches of the same bank.

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