Bank failures are making headlines, and with good reason. The number of U.S. bank failures in the past three years has skyrocketed. According to the Federal Deposit Insurance Corporation (FDIC), more than 300 banks have failed since January 2008—far more than any other time in recent history.
As banks have gone under, so have bank workers’ retirement savings. When banks fail, depositors are largely protected by the FDIC. Shareholders, however, are the last to recover on FDIC’s priority list—this is also true for shareholders in a bankruptcy. Ordinary bank employees are often among those shareholders with the greatest losses, at least proportionately, as many banks’ retirement programs consist entirely of individual account plans with an option to invest in company stock through 401(k)s or employee stock ownership programs (ESOPs). Sometimes bank workers lose their jobs just as their retirement savings are devastated. This situation exemplifies many aspects of the financial crisis, including its causes, its symptoms, and the limitations of the remedies available through litigation in cases of widespread economic distress.