The U.S. government started The Federal Deposit Insurance Corporation back in 1933. They created it because of the literally thousands of failed banks that went down in the 1920s and 1930s. The FDIC began insuring bank accounts at the beginning of 1934. Since then, no depositors have lost any insured bank account money despite a consistent number of banks failing every year.
The first role of the FDIC is to insure and to increase the public’s confidence in the American banking system. They do this in several ways. The FDIC insures minimally $250,000 in bank and thrift accounts. They watch for and take action on any risks to the deposit insurance funds. They also stop the spread of any bank failures when one of the banks does fail.
The Federal Deposit Insurance Corporation only insures deposits. This means that it does not cover mutual funds, stocks, or any other investments that some banks offer to their customers. They offer a standard $250,000 amount for each depositor’s account. This single limit amount does not apply to other types of account ownerships and accounts at other banks. To help individuals understand if the insurance provided is enough to cover their various kinds of account, the FDIC provides its Electronic Deposit Insurance Estimator.
Another important role of the FDIC lies in its supervisory position. The outfit oversees over 4,500 different savings and commercial banks to make sure that they are operationally safe and sound. This represents more than half of the banks. Those banks that are set up as state banks may choose to become a member of either the Federal Reserve System or the FDIC. Any banks that are not overseen by the Federal Reserve System are watched over by the FDIC.
Another job of the FDIC is to check on the various banks to make sure they abide by the government’s consumer protection laws. These laws include The Fair Credit Reporting Act, the Fair Credit Billing Act, the Fair Debt Collection Practices Act, and the Truth in Lending Act.
Lastly, the FDIC checks banks to make sure the different institutions are abiding by their responsibilities under the Community Reinvestment Act. This law ensures that banks help the communities where they were started to achieve their needs for credit.
Despite all of these roles, the only one that members of the public really encounter on a personal basis is the FDIC protecting insured depositors. When a bank or thrift goes down, the FDIC immediately reacts to the situation. They come in fast with the group that chartered the bank to close it down. The charter group could be the Office of the Comptroller of the Currency or the state regulator.
The next step is for the FDIC to wind up the failed bank. In their preferred method, they sell both the loans and the deposits of the bank to another banking institution. Customers rarely feel the transition in the majority of the cases. This is the FDIC’s goal, to make sure that people do not lose access to their accounts and money.
The FDIC carries out its several mandates through six regional branches. It has more than 7,000 staff members that help it to carry out these goals. The organization is based in its headquarters in the capital Washington, D.C. Besides these locations, they also have various field offices throughout the nation.
The leadership of the FDIC is supplied by the Federal Government. The President appoints the board which the Senate confirms. There are five members of their Board of Directors. No more than three of them may belong to one political party to ensure bipartisanship in the decisions.