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The Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation (FDIC) was created in 1933 as an independent agency of the United States government to insure bank customers in the event the bank fails and does not have the necessary funds available to pay claims on deposits.

Created under the Federal Reserve Act, the FDIC insures bank deposits on:

  • Individual accounts up to $100,000.
  • Joint accounts up to $200,000.
  • Retirement accounts up to $250,000.

For a bank to offer FDIC insurance, it must meet the standards for membership in the Federal Reserve system.

  • State chartered banks
  • Mutual savings institutions, if they meet certain qualifications
  • National banks

Functions of the FDIC:

  • Pay depositors if the bank fails or is forced to close by state regulators and the failed bank does not have the necessary funds to cover each claim.
  • Prevent unsound banking practices and to make sure that any discrepancies that are found will be discontinued.
  • To act as receiver for all national banks.
  • To act as receiver for state chartered banks, if the state puts in a request.
  • Make loans to insured banks, if necessary.
  • To purchase assets from insured banks, if necessary.
  • To oversee and facilitate mergers between banks if the action will prevent further losses if one of the banks is deemed to be failing.
  • To insure the continuation of a distressed bank if it is deemed that the bank provides a necessary service to the community in which it is located.
  • Administers the disclosure provisions of the Securities Exchange Act of 1934 that applies to banks that are insured but are nonmembers of the FDIC.
  • Enforce rules governing the advertising and payment of interest on deposits.
  • Give required consent for bank mergers if the resulting bank will be an insured nonmember institution.

The Federal Deposit Insurance Corporation is managed by a three member board of directors in which two are full time, and the third is the comptroller of the currency, who serves in an unofficial capacity. The two full time members are appointed to six year terms by the President of the United States.


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