As noted in the last post, what ultimately happens to acreditor's specific claim against a financial institution oftendepends on what type of claim it is, and what priority ithas. This differs depending on whether the creditor isa depositor, borrower, trade creditor, landlord or letter ofcredit holder.

Deposit Accounts. Depositaccounts are a favored class of liability -- provided that theaccounts in question are federally insured. FDIC coverage may be affected simply by the balance ondeposit in the account. Many business accounts (suchas cash management, impound or lockbox accounts, through which abusiness' essential daily cash flow moves) are likely to exceedthis limit. Therefore, businesses should carefully considerthe effects of a freeze of, or partial loss from, such essentialaccounts, and should also give serious consideration to thestability of their banks. One indication thata bank may be troubled occurs if it offers unusually high interestrates, because institutions trying to increase capital reservessometimes offer high rates to attract deposits. Depositaccounts which are not fully federally insured likely willexperience losses or delays if they are not quickly transferred ina resolution to a new, solvent bank.

Secured Loans. Another type ofcontract to which the FDIC as receiver may show relative deferenceis a loan secured by legitimate collateral. A nondefaulted secured real estate loan, for example, with anadequate loan-to-value ratio and proper documentation, canbe a valuable asset to the bank. Even if moderatelydiminished in value, it may have a strong chance of being packagedinto an asset sale, and surviving with a new, stable lender. Also, regulators are somewhat limited in their ability to abrogateor change vested property rights. The FDIC has stated that itusually will not seek to reject properly perfected and documentedsecurity agreements (including real estate mortgages). However, the outer limits of that protection are not welldefined.