Treasury securities include Treasury bills (T-bills), notes and bonds.
T-bills are more commonly purchased through a financial institution.
Customers who purchase T-bills at banks that later fails become concerned because they
think that their actual Treasury securities were kept at the failed bank. In fact, in most
cases banks purchase T-bills via book entry, meaning that there is an accounting entry
maintained electronically on the records of the Treasury Department; no engraved
certificates are issued. Treasury securities belong to the customer; the bank is merely
acting as custodian.
Customers who hold Treasury securities purchased through a bank that later fails can
request a document from the acquiring bank (or from the the FDIC if there is no acquirer)
showing proof of ownership and redeem the security at the nearest Federal Reserve Bank.
Or, customers can wait for the security to reach its maturity and receive a check from the
acquiring institution, which may automatically become the new custodian of the failed
bank's T-bill customer list (or from the FDIC acting as receiver for the failed bank when
there is no acquirer)
Even though Treasury securities are not covered by federal deposit insurance, payments of
interest and principal (including redemption proceeds) on those securities that are
deposited to an investor's deposit account at an insured depository institution ARE
covered by FDIC insurance up to the $100,000 limit. And even though there is no federal
insurance on Treasury securities, they are backed by the full faith and credit of the
United States Government - the strongest guarantee you can get.
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