After Bear Stearns Should Your Money Go In The Mattress?

Bear Stearns (BSC) took a tumble recently and, although the brokerage is being rescued by J.P. Morgan Chase & Co. (JPM), employees and other stock holders are feeling a financial pinch from the discounted sale.

There is another group wondering if Bear Stearns’ lack of liquid assets should be cause for concern. They are those people who trusted their money to this brokerage. So, with all the news about other banks about to take a tumble, is it time to get your money off Wall Street? Perhaps send it to an account in Switzerland or maybe go with the local bank aka your mattress? Not so fast. For now, it’s just important to understand what assets are being protected and how.

WHAT IS SIPC AND HOW DOES IT HELP YOU?

If a brokerage firm falters, like, say Bear Stearns, investors simply have their accounts transferred to another broker, in this case J.P. Morgan, with no loss. However, in the event that a firm fails then the Securities Investor Protection Corporation, or SIPC, steps in.

If securities or cash are missing from a brokerage account, due to fraud or more likely disorganization, then the SIPC will then ask a federal judge to appoint a trustee to oversee the liquidation of the firm's assets and an orderly transfer of customer accounts to other brokerage companies. Both cash and securities are covered, with a limit of $500,000 in value, including a $100,000 limit for missing cash. However, some types of investments are not covered, including commodity and currency futures contracts, unregistered investment contracts, and annuity contracts.