As you saw in the video, agencies were created over the last 90 years that have helped protect people and their money. For instance, in the early 1930s, during the Great Depression, the Banking Act was passed to restore confidence and trust within America's banking system. In this Act came the creation of the Federal Deposit Insurance Corporation (FDIC) whose main purpose is to maintain trust between financial institutions and their customers.
Before the 1933 Banking Act established the FDIC, if a financial institution went bankrupt, they could take your money with them. This meant that you, along with all the other people who had put money into that bank, would lose it all. Presently, if someone like Drian deposits money into a bank, they are assured that—no matter what happens to that bank—their money will be secure. So, how exactly does the FDIC instill this public confidence and trust in the country's financial system?
Well, there are a few things the FDIC can do to instill trust and to protect your money within a bank. In the table below, the left column explains some of the things the FDIC does. Click each item in column 1 to learn more about the features of the FDIC.
Savings accounts, checking accounts, money market accounts, and certificates of deposit are all insured for up to $250,000 each. (Customers who want to insure more than $250,000 can open another account.) |
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Most financial institutions, including all banks, are examined, and supervised for safety, reliability, and consumer protection/security throughout the year. |
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When a financial institution is failing or has failed, the FDIC is responsible for its orderly resolution. As the insurer of the bank's deposits, this includes giving all depositors of the failed bank their insurance (up to the $250,000 limit). Not only that, the FDIC will also assume the task of selling the assets of the failed bank and settling any debts the bank has. |
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When a bank is failing, the FDIC may step in to take control of it. This is known as a receivership. When this occurs, the FDIC will make all future decisions for the bank. |
Now that you have a better understanding of the FDIC and some of the features that the FDIC protects, apply your knowledge to the question below.
Question
What happens when a bank fails, and you have $200,000 saved in an account with them?
Your $200,000 is insured with the FDIC. So, if this bank fails, the FDIC will give you your $200,000 so that you can now save your money with another bank.
