Downey Financial, a $12.8 billion asset bank and PFF Bank & Trust, a $3.7 billion asset bank were both taken over by the FDIC and then quickly given to US Bankcorp. Deposit holders will not lose any money although it is expected that the FDIC will have to spend about $2 billion in the deal. A smaller third bank, Community Bank of Loganville, Georgia, was also closed and its $611.4 million of deposits taken over by Bank of Essex in Tappahannock, Virginia.

These closing represent the 21st, 22nd, and 23rd closings this year. Downey Financial is the second largest closing this year, trailing only the $30 billion failure of Indymac last summer.

As economic conditions deteriorate, we can expect bank failures to accelerate.

From Bloomberg:

“The restructuring or consolidation of the U.S. banking industry has probably just begun,” said Neil Katkov, senior vice president of Celent, a Boston-based financial research firm. “There’s a whole world of potential mergers and acquisitions that will continue to emerge like these one."

He continued: “We’ll probably see more regional and community banks get into trouble."

If the pace of these closings accelerate, the FDIC will deplete the $40 billion it currently has set aside to insure bank failures.

Although it is highly unlikely the government would allow the FDIC to become insolvent, there are several things you can do to protect yourself:

1. Don't just rely on FDIC insurance. Look at a bank's Bauer rating (meaure of its safety and soundness) to determine its health. BestCashCow also provides health and safety information on all banks issuing savings accounts and certificates of deposits.

2. Look at a bank's stock price. The stock price is a forward looking measure of what the market thinks of a bank's stability and future prospects.

3. Make sure your money is FDIC insured. Limits vary depending on whether you have a joint account and POD (Payable Upon Death) beneficiaries. In many cases a joint account can receive $250,000 in coverage per person and an additional $250,000 in coverage for each POD beneificiary.

4. Be conscious of the timeperiod and term of your deposit. The increase to $250,000 FDIC insurance is only in effect until December 31, 2009 at which point it reverts to $100,000. If you open a CD above $100,000 it may be covered now, but the amount in excess of $100,000 won't be on January 1, 2010.

TD Ameritrade has partnered with Suze Orman to offer the Save Yourself money market account. They're offering a $100 if you do the following:

• Open the account before December 31, 2008.
• Deposit 12 monthly consecutive automatic electronic deposits of $100 or more.
• Make the first deposit within 30 days of opening the account.

12 months after you''ve opened the account, TD Waterhouse will review it and see if you met the eligibility. If so, the cash will be deposited into your account within 4 weeks.

The account you open is a money market deposit account, insured by the FDIC. It is paying a 1% APY, so if you open the account, you're doing it for the $100 not for any interest you'll earn. 1% is a very low rate compared to the best savings and money market rates listed on the BestCashCow rate table. If you deposit the minimum of $100 per month for a total of $1,200 and then receive a $100 check, you'll make a return of 8.3%. That's not a bad return but if you don't mind going through all of the work.

Compare TD Ameritrade with other online brokerages here.

Bloomberg published an article today in which analysts and bank executives said the rates being paid by some banks was insanity (way too high). I say let's see higher rates. Savers are finally getting some measure of respect for their money.

"“You have a whole raft of smaller banks out there, some of which are in difficulty, who are paying rates that are bordering on insanity,” James Wells, chief executive officer of SunTrust Banks Inc., said in a conference call with investors Nov. 13."

The article goes on to say that:

"A key reason regulators pushed Wachovia to sell was that they were screwing up deposit costs up and down the Eastern Seaboard,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. “A lot of hot money was moving into Wachovia and other banks that weren’t matching Wachovia were getting clobbered.”

Now, I don't know about you, but I think that high rates are a good thing. One of the central premises of sites like BestCashCow is that bank competition is the only way for you to earn a fair return on your money. In the article, Ken Lewis, CEO of Bank of America describes peer bank Wells Fargo as a "rational pricer," code language for providing very low rates. Bank of America has never been know for their generous rates either. Bankers hate high deposit rates because they lower their profit. Of course Ken Lewis wants rates low. It makes his job easier and makes it easier to pay for all of the high rise buildings BofA operates in Charlotte, Boston, NY, and San Francisco. It makes it easier to pay for the Countrywide and Merrill Lynch acquisitions.

But our goal isn't to make it easier for bankers, it's to get the best return for our money so we can pay the rent, send our kids to college, and maybe retire. Consumers, people like you and me should also be working to maximize our return. But the secret a lot of banks don't want you to know is that you can get a much higher return without any additional risk just by doing a bit of research. Check out the savings, cd, and money market tables on BestCashCow or the deals on Bank Deals or the info on other financial sites. If your money is earning a significantly lower return, then you should change banks. Don't be fooled by the fancy marketing and branding campaigns. And because the banks covered on this site (and on most of the others) are FDIC insured, you can change banks without any risk. Your money is covered up to FDIC limits whether you are earning 1.2% at Bank of America or 4% at a smaller Internet bank.

So the choice is really yours. Do you want to put money into all of those banker's pockets? Or, would you rather do a bit of research and put the money into your own?