The FDIC (Federal Deposit Insurance Corporation)
The FDIC was created in 1933 as a response to the
thousands of bank failures that had occurred in the 1920s and early 1930s. The first Board of Directors of the Federal Deposit Insurance Corporation was sworn in at the Treasury Department in Washington, D.C., on September 11, 1933 (629. The Unfinished Nation). By the early 1930s, America's financial markets lay in ruin. Due to the financial chaos characterized by the stock market crash of October 1929, signaling the worst economic depression in modern history. Amid the chaos and fear about bank failures, the Banking Act of 1933 created the FDIC as a temporary measure to restore order and was signed into law by President Franklin D. Roosevelt ( 716.The American Experiment). The holiday stabilized the banking system and the crisis subsided. After the holiday most banks re-opened and there were no more crises like 1933 again. Part of the reason was new laws passed in the wake of the crisis that included setting-up the FDIC to insure bank deposits.
The government took action to protect bank depositors by creating the Banking Act of 1933, which also formed the FDIC. The FDIC's purpose was to provide stability to the economy and the failing banking system. In those failures, bank customers lost a vast amount of money Nervous investors, worried about losing their life savings, had begun to withdraw money from banks all across the nation. In many cases, this led to bank failure, as institutions simply ran out of money (http://www.allgov.com) – because if you didn't get your cash out before the bank went under, you were out of luck. From time to time, individual states attempted to insure deposits, but none of those programs survived. Bank failures and bank runs then declined, suggesting that FDIC insurance really had helped to bolster confidence in the banking system (www.banking.about.com). Officially created in the Glass-Steagall Act of 1933 and modeled after the deposit insurance program initially enacted in Massachusetts, the FDIC guaranteed a specific amount of checking and savings deposits for its member banks (www.investopedia.com).
thousands of bank failures that had occurred in the 1920s and early 1930s. The first Board of Directors of the Federal Deposit Insurance Corporation was sworn in at the Treasury Department in Washington, D.C., on September 11, 1933 (629. The Unfinished Nation). By the early 1930s, America's financial markets lay in ruin. Due to the financial chaos characterized by the stock market crash of October 1929, signaling the worst economic depression in modern history. Amid the chaos and fear about bank failures, the Banking Act of 1933 created the FDIC as a temporary measure to restore order and was signed into law by President Franklin D. Roosevelt ( 716.The American Experiment). The holiday stabilized the banking system and the crisis subsided. After the holiday most banks re-opened and there were no more crises like 1933 again. Part of the reason was new laws passed in the wake of the crisis that included setting-up the FDIC to insure bank deposits.
The government took action to protect bank depositors by creating the Banking Act of 1933, which also formed the FDIC. The FDIC's purpose was to provide stability to the economy and the failing banking system. In those failures, bank customers lost a vast amount of money Nervous investors, worried about losing their life savings, had begun to withdraw money from banks all across the nation. In many cases, this led to bank failure, as institutions simply ran out of money (http://www.allgov.com) – because if you didn't get your cash out before the bank went under, you were out of luck. From time to time, individual states attempted to insure deposits, but none of those programs survived. Bank failures and bank runs then declined, suggesting that FDIC insurance really had helped to bolster confidence in the banking system (www.banking.about.com). Officially created in the Glass-Steagall Act of 1933 and modeled after the deposit insurance program initially enacted in Massachusetts, the FDIC guaranteed a specific amount of checking and savings deposits for its member banks (www.investopedia.com).
The Banking Act of 1933 set-up the FDIC and laid the groundwork for its powers and its initial funding. Starting in 1933, and continuing today, the FDIC:
The Banking Act of 1935 made the FDIC a permanent agency and refined how the organization works (for example, funded by banks instead of by the US Treasury). Since that time, the FDIC notes that “no depositor has lost a single cent of insured funds as a result of a failure" (www.banking.about.com)
- Insures deposits and quickly pays depositors’ claims if their bank fails
- Steps in as receiver or conservator to resolve a failed bank by doing one or more of the following:
- Providing temporary assistance to help make the bank healthy again
- Selling the failed bank as a whole, or a large part of its assets and deposits, to a healthy bank under what’s now called the Purchase and Assumption Program
- Marshaling the bank’s assets (principally loans owed by the bank’s borrowers), liquidating those assets to build-up cash, and using that cash to pay the bank’s creditors (principally, the bank’s depositors (http://www.constructionlawtoday.com).
The Banking Act of 1935 made the FDIC a permanent agency and refined how the organization works (for example, funded by banks instead of by the US Treasury). Since that time, the FDIC notes that “no depositor has lost a single cent of insured funds as a result of a failure" (www.banking.about.com)
Bibliography
Burns, James MacGregor. The American Experiment. New York: Knopf, 1982. Print
Brinkley, Alan. The Unfinished Nation. N.p.: McGraw-Hill Humanities Social, 2006.Print.
http://banking.about.com/od/securityandsafety/a/What-Is-The-Fdic.htm
"What Is the FDIC?" About.com Banking / Loans. N.p., n.d. Web. 26 Feb. 2014
http://www.constructionlawtoday.com/2009/06/fdic-history-and-extraordinary-powers/
FDIC History & Extraordinary Powers." Construction Law Today. N.p., n.d. Web. 26 Feb. 2014.
http://www.investopedia.com/articles/economics/09/fdic-history.asp
"The History Of The FDIC." Investopedia. N.p., n.d. Web. 25 Feb. 2014.
http://www.allgov.com/departments/independent-agencies/federal-deposit-insurance-corporation-fdic?agencyid=7426
"AllGov - Departments." AllGov - Departments. N.p., n.d. Web. 26 Feb. 2014.
Burns, James MacGregor. The American Experiment. New York: Knopf, 1982. Print
Brinkley, Alan. The Unfinished Nation. N.p.: McGraw-Hill Humanities Social, 2006.Print.
http://banking.about.com/od/securityandsafety/a/What-Is-The-Fdic.htm
"What Is the FDIC?" About.com Banking / Loans. N.p., n.d. Web. 26 Feb. 2014
http://www.constructionlawtoday.com/2009/06/fdic-history-and-extraordinary-powers/
FDIC History & Extraordinary Powers." Construction Law Today. N.p., n.d. Web. 26 Feb. 2014.
http://www.investopedia.com/articles/economics/09/fdic-history.asp
"The History Of The FDIC." Investopedia. N.p., n.d. Web. 25 Feb. 2014.
http://www.allgov.com/departments/independent-agencies/federal-deposit-insurance-corporation-fdic?agencyid=7426
"AllGov - Departments." AllGov - Departments. N.p., n.d. Web. 26 Feb. 2014.