The Federal Deposit Insurance Corporation (FDIC) insured depositors against the loss of up to $5,000 of their deposits if their bank should collapse.
Federal Deposit Insurance Corporation
Background: The 1929 Stock Market Crash, that triggered the Great Depression, led to the closure of thousands of banks. Many people lost their life savings and the banks were seen as so unsafe that people began hoarding their money at home
Background: At this time bank failures were seen as the product of bad management and not subject to corrective action by the Federal Reserve
Background: In October 1931 bankers in the private FDICtor attempted to address the crisis by organizing a National Credit Corporation to extend loans to troubled banks but the corporation failed within just a few weeks
Background: Bankers and business leaders appealed to the federal government for assistance and the Hoover Administration responded by creating the Reconstruction Finance Corporation (RFC) a new federal lending agency but the number of bank failures and depositor losses continued to grow
President Roosevelt knew that he had to restore confidence in the US banking system and signed the Emergency Banking Relief Act into law on March 9, 1933 which was soon followed by the Glass-Steagall Act, also known as the Banking Act of 1933, on June 16, 1933
There was formidable opposition in Congress to the idea of federal deposit insurance but the idea received enormous public support. The critics were silenced and the FDIC was established
The Glass-Steagall Act (Banking Act of 1933) created the Federal Deposit Insurance corporation through an amendment to the 1913 Federal Reserve Act. It was initially intended as a temporary federal deposit insurance plan
What is the Federal Deposit Insurance Corporation? The Federal Deposit Insurance Corporation (FDIC) is an independent federal agency that was created to promote public confidence and stability in the nation's banking system during the Great Depression.
The FDIC initially insured bank customers against the loss of up to $5,000 of their deposits if their bank should collapse.
The FDIC is managed by a board of directors consisting of 3 directors, appointed by the president with the consent of the Senate for six-year terms. The Comptroller of the Currency, J. F. T. O'Connor, was designated as a director of the FDIC
The FDIC was given the task of insuring individual deposits in banks, up to a certain specified limit
The FDIC accepted all banks for insurance that it found to be solvent
Banks that participated in the FDIC program were subject to a series of annual examinations to ensure that each bank was being operated properly.
The FDIC acts as adviser to the court in corporate bankruptcy cases.
The Banking Act of 1935 terminated the temporary federal deposit insurance plan and inaugurated the permanent plan.
No depositor has ever lost a cent of insured deposits since the Federal Deposit Insurance Corporation (FDIC) was created in 1933. Currently, savings deposits are insured against bank failures up to a limit of $250,000.
|US American History
|1929-1945: Depression & WW2