Is Your Money Safe at Citibank?

The massive Wall Street rally this afternoon, and a statement in support of Citigroup's chairman, didn't help Citi, which closed down slightly on the day at $9.45 a share. Clearly the market is very worried about Citi's future, and the fact that it's trading in single digits -- which means that a modest $1 decline in the share price means headlines about a 10% plunge -- doesn't help.

But this is important: don't panic. Citi really is too big to fail, and its depositors are safe. Sprizouse is wrong when he says this:

The FDIC cannot protect all of CitiBank's depositors if the massive behemoth of bank goes under.

In fact, the FDIC can easily protect all of Citi's insured depositors. According to the FDIC, the combined total domestic deposits of Citigroup's insured subsidiaries was $266 billion as of June 30. Of that $219 billion was in the largest subsidiary, Citibank NA, and of that, just 40.58% was actually insured -- or about $89 billion.

Now that number will have gone up when the FDIC raised its insurance limit to $250,000 from $100,000, but even now I doubt that the total amount of money the FDIC is insuring at Citibank is much more than $100 billion. A lot of money? Yes. But not a huge amount by TARP standards, and easily within the abilities of the US government to cover.

Now, if you have uninsured deposits at Citibank -- and the vast majority of Citibank's $773 billion in deposits are uninsured, mostly because they're held outside the US -- then you might do well to wonder how safe those deposits really are. If even a large minority of those depositors ends up deciding to move their money elsewhere, then Citi, I'm pretty sure, is toast.

But for most individuals with checking accounts, CDs, and the like at Citibank, there's nothing to worry about, even if Citi fails. And the same is true for anybody with a brokerage account at Smith Barney. Your money is safe, you can sleep easily tonight.