The Federal Deposit Insurance Corporation – What Does the FDIC Do?
After the numerous bank failures in the 1920’s and 1930’s that were part of the Great Depression, Congress created the Federal Deposit Insurance Corporation in 1933 to help restore consumer confidence in the banking system. This was an attempt to try and get the country’s finances back in order, so that individuals and small businesses would put their money in banks again. The FDIC is considered to be an independent agency that acts on behalf of the federal government, and is responsible for insuring deposits at the banks and savings institutions throughout the country.
Some other responsibilities that the Federal Deposit Insurance Corporation takes on includes promoting the safety of these banking institutions by monitoring any risks that they are exposed to, intervening when necessary. If a banking institution looks like it will fail, the FDIC is able to step in and take over. This helps protect the deposits of the bank’s customers. As a result, since 1934 no insured funds have been lost as a result of a bank failing. However, not all banking products are covered by this insurance, so be sure to find out what is covered by the FDIC if you are thinking about making a deposit or taking out a loan.
A few examples of the types of accounts covered by the Federal Deposit Insurance Corporation include savings, checking, trust funds, IRA, CD and money market accounts. It does not cover things such as mutual funds or other investment accounts, by contrast. If you have purchased stocks, bonds, or other insurance policies, you will have to find separate coverage for these. The job that the FDIC performs is extremely important, because it can insure deposits for at least $250,000 and can limit any effect on the economy of bank failure.
The money for this insurance is not provided by Congress or the federal government at any level. It is provided by the premiums that banks pay for deposit insurance coverage, as well as any earnings on investments from the US Treasury. It’s estimated that the Federal Deposit Insurance Corporation currently insures over 7 trillion dollars in deposits. The FDIC is headed by a Board of Directors constructed of five people, who are appointed by the President. They must also be confirmed by the Senate, and must include an equal balance of political parties. This is meant to provide an impartial form of leadership, as the FDIC is primarily constructed to assist consumers.