DEFINITION of 'Net-Worth Certificate'

An instrument used by the FDIC starting in 1982 as part of an effort to save failing banks and thrifts by providing capital. When deposit-rate restrictions that had existed for decades were lifted, banks and thrifts found themselves having to pay out more in interest on deposits than they were earning from their long-term investments, such as 30-year fixed-rate mortgages and government bonds. Net-worth certificates gave the banks and thrifts time to resolve their problems.

BREAKING DOWN 'Net-Worth Certificate'

During the 2008 financial crisis, some people, including former FDIC chairman William Isaac, suggested reintroducing net-worth certificates to rescue struggling banks while using minimal government intervention.

RELATED TERMS
  1. Thrift

    Thrifts are savings and loans associations. Thrifts also refer ...
  2. Federal Deposit Insurance Corporation ...

    The U.S. corporation insuring deposits in the U.S. against bank ...
  3. Purchase And Assumption - P&A

    A transaction in which a healthy bank or thrift purchases assets ...
  4. Depository Institutions Act of ...

    A law passed by Congress with the intent of making savings and ...
  5. Office Of Thrift Supervision - ...

    The bureau of the U.S. Treasury Department that is responsible ...
  6. Advance Dividend

    An estimate of the present value of an asset being liquidated ...
Related Articles
  1. Financial Advisor

    2 Thrift Conversions for Your Portfolio (CHFN, WBB)

    Buying the stocks of these boring little banks can lead to very exciting profits.
  2. Investing

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  3. Investing

    FDIC Sues Bank of America Over Deposit Insurance

    In a lawsuit filed Monday, the FDIC says Bank of America owes at least $542 million for deposit insurance.
  4. Small Business

    A New Plan To Prevent Future Bailouts

    This new and innovative plan by the FDIC could help the government avoid the next bailout.
  5. Personal Finance

    The 7 Best Places to Put Your Savings

    You work hard to put your money away for the future, but where should you keep it?
  6. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  7. Investing

    Certificate of Deposit (CD)

    A certificate of deposit, or CD, is a common financial product sold by banks, thrift organizations and credit unions. This type of product is often called a time deposit. CDs are insured up to ...
  8. Personal Finance

    Is a 30-Year Mortgage Really Best?

    It's the most popular choice, but home buyers with 30-year mortgages may be paying more to finance their home than they need to.
  9. Investing

    Certificates Of Deposit

    Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union.
RELATED FAQS
  1. Does the FDIC cover business accounts?

    Learn what types of business accounts are insured by the FDIC, and find out how much of the deposits made by a business are ... Read Answer >>
  2. Are variable annuities FDIC insured?

    Understand how variable annuities are not insured by the FDIC but realize that most states have guarantee funds in place ... Read Answer >>
  3. Is my IRA/Roth IRA FDIC-Insured?

    Understand how the Federal Deposit Insurance Corporation protects certain accounts, and learn if traditional and Roth IRAs ... Read Answer >>
  4. What is the difference between a savings & loan company and a bank?

    Find out how a savings and loan company, sometimes also known as a thrift or savings institution, focuses on different types ... Read Answer >>
Trading Center