Court Case: Federal Deposit Insurance

Did Farm Bureau Life Insurance Company, LabOne, and Dr. J. Alexander Lowden have a duty to inform Gary and Renna Pehle that they were HIV-positive?

Faced with this economic decline, came other factors that included unemployment and lack of confidence in banks (Church 100). Restoring faith in banks across the United States was one goal for FDR. As depositors lost confidence in the national bank, over $1,000,000,000 was taken out in cash and hoarded (Boardman 64). The Emergency Banking Act closed all banks for four straight days, and put them under inspection by the national government (Schraff 52). Banks were put under meticulous scrutiny by the Treasury Department. The U.S. government demanded that all hoarded gold be returned and all of the $1,000,000,000 was deposited (Boardman 65). Banks were allowed to open only under a strict system of licensing (Schraff 52). Another banking program was The Federal Deposit Insurance Corporation, or FDIC, which was created by Congress to guarantee deposits up to $5000 (Gupta). In the case

Before FDIC, there was no guarantee beyond the bank's own stability. This meant that only those who were first to withdraw their money from a troubled bank would get it; those who waited stood the risk of losing their life savings overnight. As fear of bank closures started to spread, a small trickle of worried customers looking to withdraw money would soon turn into a stampede until the bank was unable to meet the withdrawal

In response to this panic, a committee was established to find the flaws of the current banking system. This committee, the National Monetary Commission, found there were two main flaws dominating the system. First, the currency was not responsive to changes in demand. (Born...13). This meant that the bank had a fixed amount of currency, regardless of the

The FDIC is another program that exists today, protecting people’s money in the bank up to $250,000 per account per bank. This came at a time when people rushed to the banks when the stock market crashed to pull all their money out. When this occurred, many banks were unfortunately forced to close their doors due to a lack of money. Many people lost their hard earned life savings as a result as well. With the implementation of the FDIC, people were guaranteed to keep their life

If the depositor has over the $250.000.00, the depositor may still be insured if it meets specific requirements, but the FDIC has limitations to its coverage and does not cover things such as content of a safe deposit box, life insurance plans, or stocks. However, the FDIC will cover checking accounts, saving accounts, money market accounts, single accounts and joint accounts. Insurance is only guaranteed by the FDIC in the case of a bank failure, and the risk of bank failure has vastly decreased since 2013. Between 2008 and 2013, over 400 banks failed, one being the largest bank failure ever covered by the FDIC. Washington Mutual crashed in 2008, and had over $300 billion worth of assets. Since 2013, only a handful of banks have

The Federal Deposit Insurance Commission Act was to provide steadiness to the economy and the failing banking system, the FDIC also insures savings so another great depression does not fall into place. The FDIC was supposed to give the banking system the ability to maintain a steady reassurance to the economy. By doing so, the FDIC promised the member banks a specific amount of money into their checking and savings accounts without any questioned asked. This money was to be used incase of a bank failure was in

Before the advent of the Federal Deposit Insurance Corporation (FDIC) in 1933 and the general conception of government safety nets, the United States banking industry was quite different than it is today. Depositors assumed substantial default risk and even the slightest changes in consumer confidence could result in complete turmoil within the banking world. In addition, bank managers had almost complete discretion over operations. However, today the financial system is among the most heavily government- regulated sectors of the U.S. economy. This drastic change in public policy resulted directly from the industry’s numerous pre-regulatory failures and major disruptions that produced severe economic and social

The first order was to reopen the banks and restore public confidence by enacting the Glass Steagall-Banking Reform Act, which insured deposit up to $5,000.00. Since then people deposit their money with the assurance that it will be there when they need it.

The Glass Steagall Act was passed on 1933, which is also known as The Banking Act to tighten regulation on the way banks did their business. This act was written as an emergency measure when about 5,000 banks failed during the Great Depression. Banks mostly failed because of the way they would invest with money. The act prohibits banks from investing money on investments that turn out to be risky. Banks could no longer sell securities or bonds. The act also created Federal Deposit Insurance Corporation (FDIC) to protect the deposits of individuals, which is still used to this date. The FDIC in this era insures your deposits in your bank up to $250,000. This gave the public confidence again to deposit their money in the bank. In 1933

The banking industry as a whole after the stock market crashed was going bankrupt due to not being able to carry the “bad debt” that was created from using customer money to buy stock. Because the banks were out of money, they were unable to cover customer withdrawals from their bank, causing many bank customers to lose all of their savings. With the uncertainty of the future of the banking industry, many people withdrew all of their savings, which caused more than 9,000 banks to close their doors and go out of business (Kelly). Due to the effects of the Great Depression, and the collapse of the banking industry, the government created regulations to prevent similar failure in the future. For Example, the SEC, (or Securities Exchange Commission), which regulates the sell and trade of stocks, bonds and other investments was created as a result of The Great Depression. The FDIC (or Federal Deposit Insurance Corporation), was created to insure bank accounts so that that the consumer would be protected if the bank were to go out of business (Kelly). The Great Depression's effect on the banking industry led to many useful changes to the banking industry and helped restore confidence in banks in the American people.

Wells Fargo was established in 1852 by Henry Wells and Williams Fargo who joined a group of other investors to form a transportation and banking company. In 1849, gold was discovered in California, which encouraged a huge demand for its cross country shipping and by 1852 Wells Fargo shipped its first consignment of gold. Wells Fargo also established merger deals with Pony expresses which made them one of the pioneers of pony transportation. This company later expanded to a company that offered not just pony and gold transportation services, but also offered banking services by purchasing gold and selling paper bank drafts as good as gold. In 1905, the banking branch of the company merged with the Nevada National Bank and established its new headquarters in San Francisco. ("Wells and Fargo start shipping and banking company", 2016).

The FDIC was created by the 1933 BANKING ACT after the great depression to restore trust in the American banking system; more than one-third of banks failed in the years before the FDIC's creation, and bank runs were common.The insurance limit was initially US$2,500 per ownership category, its reserves are not funded by public funds; member banks' insurance dues are the FDIC's primary source of funding.

INPUT DATA: Amount Needed to Raise Flotation Costs Stock Offer Price Market Value/Book Value Ratio (Dollars in thousands) Assets Cash U.S. Treasuries Mortgage-backed Securities Municipal Bonds Government Agency Securities Total Cash & Securities Residential Mortgage Loans Consumer Loans Business Loans Total Loans Fixed Assets Total Assets Liabilities Passbook Savings Non-interest Checking N.O.W. Accounts Money Market Accounts Certificate of Deposits Total Savings Borrowed Money Other Liabilities Total Liabilities Capital Stock ($100 par value) Retained Earnings Total Equity Total Claims Loan Loss Reserve Allowable Risk Adjustment Weights: No default risk Low default risk Res. loans &

More banks would be likely to adopt this attitude, which could cause bank failures due to the risk taken, and the failure of a large number of banks could stretch the resources of the Deposit Insurance Scheme to the point where it is unable to meet its obligations to the depositors, thus undermining the faith of the public in the system. This potential of moral hazard can be mitigated by limiting coverage of deposits, either by amount, or number and so on, so as to prevent bankers from being fully absolved of the consequences of the risks taken. Further, a deposit insurance scheme, in an economy that has not stabilized, can end up straining the resources of the