The Federal Deposit Insurance Corporation was a governmental agency set up after the great depression in 1929. So very many people lost everything when the banks closed their doors, that President Roosevelt felt he had to prevent this from happening again.
FDIC – What does it do?
The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.
The Banking Act of 1933
President Roosevelt signs this act on June 16, 1933, to raise the confidence of the U.S. public in the banking system by alleviating the disruptions caused by bank failures and bank runs.
From 1929 to 1933, bank failures resulted in losses to depositors of about $1.3 billion. Before the FDIC was in operation, large-scale cash demands of fearful depositors often struck the fatal blow to banks that might otherwise have survived.
Since the FDIC went into operation, bank runs no longer constitute a threat to the banking industry.
- Establishes the FDIC as a temporary government corporation
- Gives the FDIC authority to provide deposit insurance to banks
- Gives the FDIC the authority to regulate and supervise state nonmember banks
- Funds the FDIC with initial loans of $289 million through the U.S. Treasury and the FRB
- Extends federal oversight to all commercial banks for the first time
- Separates commercial and investment banking (Glass-Steagall Act)
- Prohibits banks from paying interest on checking accounts
- Allows national banks to branch statewide, if allowed by state law.
Trust through Transparency
In 2018, FDIC Chairman Jelena McWilliams announced Trust through Transparency, a new initiative to foster a deeper culture of openness in the FDIC. Building on the FDIC’s foundation of public trust and accountability, this initiative is strengthening trust between the FDIC, other regulators, the public, and banks.
All information is Curtesy of the website FDIC.com and the Federal Reserve. For more information go to https://www.fdic.gov/about/history/