Congress created the Federal Deposit Insurance Corporation (FDIC) in 1933 to protect consumers who hold their money in banks from bank failures. Depositors—persons who hold money in savings accounts, checking accounts, certificates of deposit, money market accounts, Individual Retirement Accounts (IRAs), or Keogh accounts—have FDIC protection of up to $100,000 in the event of a bank failure. The FDIC regulates all banks that are members of the Federal Reserve System and certain banks that are not members of the Federal Reserve System. It is the FDIC's mission to monitor and regulate the banking industry, making certain that banks operate safely and legally, and to prevent bank failures while encouraging healthy competition within the industry. When a bank does fail by not having sufficient assets, the FDIC uses its money to reimburse the bank's depositors. It then sells the failed bank's assets and uses the profits to assist when other banks fail.
The FDIC employs approximately 8,000 people throughout the country. The headquarters are in Washington, D.C., but regional offices exist in Atlanta, Boston, Chicago, Dallas, Kansas City, Memphis, New York City, and San Francisco. In addition, field examiners, whose job is to conduct on-site inspections of banks, have field offices in 80 more locations throughout the country.
The FDIC has jurisdiction over banks in the 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands. It regulates banks, enforcing rules such as the Equal Credit Opportunity Act that prohibits certain forms of discrimination in lending, and inspects banks to be sure they are operating profitably and legally. Banks that are insured by the FDIC pay an assessment four times per year to the FDIC. The amount of assessment paid by the bank depends in part on the amount of funds deposited with the bank.
Banking history in the United States changed forever with the Great Depression. The Great Depression began when the stock market crashed in October 1929, causing numerous banks to fail, which in turn caused bank depositors in many cases to lose most or all of their money. U. S. President Franklin Delano Roosevelt and Congress responded by creating the FDIC to guarantee the safety of bank deposits and regain the public's confidence in the banking industry. The history of the FDIC, however, may be traced back even before the Great Depression.
When the United States was formed in 1776, the thirteen original colonies each had their own banking systems, with no uniform currency and little government involvement in the banking systems. In
1791, Congress created the First Bank of the United States, a bank in Philadelphia that closed in 1811. As the country grew, banking remained largely unregulated and inconsistent. Following the Civil War, the economy in the North prospered while the economy in the South floundered. To encourage economic stability and consistency throughout the country, the National Banking Act of 1864 created national banks as well as the Office of the Comptroller of the Currency (OCC), and the dollar became the national currency. Bank failures in the early...
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