The Board of Directors that manages the FDIC consists of five members. The president appoints these members and the senate is responsible for the confirmation of their appointment. The Comptroller of the currency and the Director of the consumer financial bureau are also included among the five members. It is important to note that, three is the highest number of members who can be from the same political party.
The creation of the FDIC in 1933 is directly related to the failures of thousands of banks. Depositors used to risk some major financial losses when a bank failure occurred before FDIC protection came to their rescue. FDIC estimated a total of $1.3 billion that the depositors lost between 1930 and 1933. This amount is equivalent to $24.5 billion in today’s dollars. Such immense damage was caused due to bank failures.
It is an independent organization of the federal government and receives no congressional appropriation. Banks and saving associations provide their funding through premiums that they pay for deposit insurance coverage. The FDIC is responsible for insuring trillions of Dollars of deposits in U.S banks and thrifts deposits in almost all the banks and saving associations in the United States.
Wondering what’s a thrift?
A financial institution whose field of specializations are mostly home mortgages and consumer loans. It can also offer similar services and financial products as commercial banks.
Maintaining stability and upholding confidence in the financial system of the nation.
FDIC’s headquarter is in Washington, DC. Many regional offices around the country which also include field offices are established since its birth.
What it Does
- Insures corporations against business failures.
- Provides services for making complex and large institutions resolvable
- Ensures safety and soundness to financial institutions.
- Assures consumer protection by examining and supervising financial institutions
- Insures public investment in the stock market.
- Insures banks to facilitate their investments in the stock market.
- Insures Deposits in banks.
- Offers management of receiverships.
- The FDIC doesn’t insure securities, mutual funds, annuities, or investments of a similar kind, but insures deposits only.
Supervision & Examination
FDIC provides operational safety and soundness to more than 5,000 banks through directly examining and supervising the savings. The office of the Comptroller of the currency or the state holds the authority to charter the banks. Banks that are not in compliance with the Federal Reserve System are regulated by the FDIC as their primary federal regulator.
For each account ownership category, the FDIC insures each bank with a standard amount of $250,000. Needless to say, it’s a great accomplishment to ensure ‘zero loss’ of the depositors since the beginning of FDIC’s incredible journey on January 1, 1934.
The FDIC also runs thorough examination to make sure that the banks are in compliance with the consumer protection law, including –
- The Fair Credit Billing Act
- The Fair Credit Reporting Act
- The Truth in Lending Act and
- The Fair Debt Collection Practices Act and many more.
Last but not least – Community Reinvestment Act is also an important law that the banks are supposed to be in compliance with. The FDIC examines if the banks are helping to meet the credit needs of the communities they were chartered to serve as per the law.
The FDIC considers taking one of these two steps when a failure occurs. The first one involves setting up the insured accounts with a different bank or a thrift. The amount should be the same as it was in the failed bank.
The FDIC will issue a check-up to a limit of $250,000 per covered account as a second option. This is a more direct way to reimburse the depositor.
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The FDIC i.e. the Federal Deposit Insurance Corporation is a safe haven for depositors as it protects their insured money. The financial system is also indebted to the FDIC as it helps it to keep running as a whole. This is a statement backed by the unbelievable fact that no depositor has lost a penny since the birth of the FDIC.