FDIC

=**FDIC**=

FDIC stands for the Federal Deposit Insurance Corporation, created by the Glass-Steagall act of 1933. It garuntees the safety of deposits in member banks (up to $250,000 per member per bank). The FDIC also performs consumer protection functions, manages banks in recieverships, and supervises financial institutions. During the 1930s, the U.S. experienced the Great Depression. During the height of the depression, unemployment rates were up 25%. Bank runs happened often because there was no insurance on deposits at banks. Customers ran the risk of losing their money if their bank failed. On June 16, 1933, President FDR signed the Banking Act. This made the FDIC a temporary government corporation, gave the FDIC authority to deposit insurance to banks, extended federal oversight to all commercial banks for the first time, prohibited banks from paying interest on checking accounts, and let the FDIC regulate and supervise all nonmember banks.



** "Full Faith and Credit" **
In light of apparent systemic risks facing the banking system, the adequacy of FDIC's financial backing has come into question. Beyond the funds in the Deposit Insurance Fund above and the FDIC's power to charge insurance premia, FDIC insurance is additionally assured by the Federal government. According to the FDIC.gov website (as of January 2009), "FDIC deposit insurance is backed by the full faith and credit of the United States government". This means that the resources of the United States government stand behind FDIC-insured depositors.The statutory basis for this claim is less than clear. Congress, in 1987, passed a non-binding "Sense of Congress" to that effect, but there appear to be no laws strictly binding the government to make good on any insurance liabilities unmet by the FDIC.

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Some examples of uninsured products are:

 * Stocks, bonds, mutual funds, money funds.
 * Losses due to theft or fraud at the institution.
 * Investments backed by the US government.
 * Accounting errors.
 * Insurance and annuity products.

In the 1980s there was an S&L (savings and loan) crisis. This was the FDIC's first large scale test. Due to a confluence of events, many large banks were in trouble. During this time, the FSLIC (Federal Savings And Loan Insurance Corporation) merged with the FDIC. Due to a financial crisis in 2008, 25 banks were taken over by the FDIC. In July of 2009, the FDIC launched its Legacy Loans Program (LLP). This helps banks rid their balance sheets of toxic assets which can help them raise new capital and increase lending.

In 1934, the FDIC's insurance limit was only 2,500, As of 2008, the FDIC's insurance limit is $250,000. Former funds Between 1989 and 2006, there were two separate FDIC funds — the Bank Insurance Fund (BIF), and the Savings Association Insurance Fund (SAIF). The latter was established after the savings & loans crisis of the 1980s. The existence of two separate funds for the same purpose led to banks attempting to shift from one fund to another, depending on the benefits each could provide. In the 1990s, SAIF premiums were at one point five times higher than BIF premiums; several banks attempted to qualify for the BIF, with some merging with institutions qualified for the BIF to avoid the higher premiums of the SAIF. This drove up the BIF premiums as well, resulting in a situation where both funds were charging higher premiums than necessary.