The Pros And Cons Of Federal Deposit Insurance

The Federal Deposit Insurance Corporation (FDIC) is based in the United States and is run by the government. The banking Act of 1933, als known as the Glass-Steagall Act, led to its establishment due to the Great Depression that had been experienced in United States. This act came into play due to the Great Depression. During this time, people were withdrawing their money from the banks and keeping it at home. People were not feeling very confident about the banking system. So, President Franklin Roosevelt had to step in and do something. The day after President Roosevelt’s inauguration, he declared a four-day banking holiday that shut down the banking system, which included the Federal Reserve. Several days later, the Emergency Banking

These reserve banks also have their own Board of Directors, which is made up of 6 people appointed by the member banks who hold stock in the reserve bank, as well as 3 people appointed by the Board of Governors. Together all of these banks make up the Federal Reserve, and attempt to manipulate the economy through the use if the FOMC.

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

The Federal Reserve System is composed of twelve board members. The Board of Governors consists of seven of these members and the other five members are Reserve Bank presidents. This committee is responsible for many things including: monitoring oversees open market operations; this is the top resource to assist in the expansion of credits and financial

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

In the document is also said that even when people have money in that bank people would go to the bank and go get their money since that bank was going to be a failed and it also said that after their failure the repressive effect on the spending of its clients. They couldn’t do anything to help the bank to crash even though they will all be crashed any day.

The Federal Reserve Board is a regulating body that determines how United States will lend money by coordinating the banks and defining the value of the dollar. A Governor on the Federal Reserve board communicates with the twelve region 's bank presidents, economic analysts, and their regional directors, and collectively define the dollar by selling long-term and short-term bonds that advance a percentage of the worth. Once an agreement has been made upon fraction percentage, banks are required to maintain that stated amount in a Federal Reserve vault, or the bank’s vault. The Federal Reserve loans temporary funds to the banks that do not meet the reserve requirement in the form of a short term loan, usually overnight. A large amount of the Federal Reserve Board’s time is spent discussing fractions of a percent on specific money-related rates which steers the economy.

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 Reserve house the Board of Governors, The Federal Reserve Banks, The Federal Open Market Committee (FOMC), and Advisory Committees. The Federal Reserve Bank is directed by the Board of Governors or Federal Reserve Board, which is located in Washington D.C. The Board of governors is the national aspect of the Federal Reserve System and consists of nine board of directors which are appointed by the President serve a fourteen year term. The Chairman and Vice Chairman are appointed to four year terms which can be renewed (Federal Reserve, 2009). The Federal Reserve Banks are a network of 12 banks with 25 branches. Each banks serves a region of the country and the 12 locations are “Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco” (Federal Reserve System, 2001). These Federal Reserve Banks serve other banks, the U.S. Treasury and inadvertently, the public. The FOMC is made up of twelve members, seven from the Board of governors and five Federal Reserve Bank presidents (Federal Reserve System, 2001). The Advisory committee advises on the Federal Reserve System and provides information on the effect of system policies. The advisory committee includes the Federal Advisory Council, the Consumer Advisory Council, and the Thrift Institutions Advisory Council, which work together to advise individual Federal Reserve Banks on these interests (Federal Reserve System,

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

Many people lost as much as ten times their initial investment, which shook consumer confidence. In an effort to cover their margins, people rushed the banks in masses, demanding their money. Soon, banks began to run out of cash and went bust.

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.

Implementing the FDIC was a step in the right direction however I agree that the new banking regulations are not enough. Also, in my opinion, that may have been a bit about greed when the banks continued to lend to Americans knowing they would not be able to satisfy their loans. I would also have to agree with you regarding the bail outs. I was against this as well and thought to myself why are we bailing them out versus allowing them to fail. I came across an article which discussed this issue. The article in Forbes mentioned, " Many people have asked why the government bailed them out. Isn't capitalism designed to get rid of the weak and the failed; so why didn't we just let them fail? The answer was that they were too big to fail and allowing

The Federal Reserve Bank has done an adequate job over the past decade by maintaining exchange rates and steadily progressing. In addition, the organization has attempted to provide consumers with financial resources for making better decisions. For example, in response to the Recession of 2007-2009, the Federal Reserve Bank oversees the Bureau of Consumer Financial Protection (CFPB)—an independent bureau within the Fed to help give consumers the information they need to make financial decisions (Koba, 2015).

To create more security for banks and depositors, President Roosevelt and his administration founded the Federal Deposit Insurance Agency (FDIC). This provided assurance to depositors and account holders that, even were banks to fail, a federally guaranteed insurance fund would cover losses so that depositors would not lose their money. This created more stability for banks and the economy. For this funding to function effectively, a policy would need to be in place to ensure that insurance funding would be available.