A couple of weeks ago, I opened a CD with Countrywide at 5.65% APY (looks like rates have come down a little). It should not be a problem even in case of bank failure as long as you have less than the limit on deposit.
In the 1990s I had CDs at Imperial Savings and Home Fed. When they failed, the Resolution Trust Corporation came in and ran the banks until they found buyers for the assets. No big deal.
