Federal Deposit Insurance Corporation

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Federal Deposit Insurance Corporation

(FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $250,000. The corporation was established in 1933 to prevent a repetition of the losses incurred during the Great DepressionGreat Depression,
in U.S. history, the severe economic crisis generally considered to have been precipitated by the U.S. stock-market crash of 1929. Although it shared the basic characteristics of other such crises (see depression), the Great Depression was unprecedented in its
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 when bankrupt banks could not return the money deposited in them. It is managed by a five-member board of directors, appointed by the president with the consent of the U.S. Senate. The FDIC provides coverage for deposits in national banks, in state banks that are members of the Federal Reserve SystemFederal Reserve System,
central banking system of the United States. Established in 1913, it began to operate in Nov., 1914. Its setup, although somewhat altered since its establishment, particularly by the Banking Act of 1935, has remained substantially the same.
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, and in other qualified state banks. (Mutual fundsmutual fund,
in finance, investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value (i.e.
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 and other securitiessecurities,
in finance, instruments giving to their legal holders rights to money or other property. Securities include stocks, bonds, notes, mortgages, bills of lading, and bills of exchange. See speculation and stock exchange.
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 are not covered.) It may also make loans to insured banks in the interest of protecting the depositors. The corporation derives its income from assessments on insured banks and interest on government securities. Since 1989 the FDIC has supervised the Savings Association Insurance Fund, the agency that was created to provide coverage for savings and loan associationssavings and loan association
(S&L), type of financial institution that was originally created to accept savings from private investors and to provide home mortgage services for the public.

The first U.S. S&L was founded in 1831.
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 when the Federal Savings and Loan Insurance Corporation became insolvent. A sharp increase in bank failures in the late 1980s and early 1990s led to the insolvency (1991–92) of the FDIC as well, forcing it to seek government loans. The fund recovered by the mid-1990s, but the mortgage and financial crisis that began in 2007 again threatened the fund and led to significant FDIC takeovers of banks.
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References in periodicals archive ?
ASI is sometimes able to provide its services at a discount relative to FDIC insurance. According to the Chicago Tribune, "Craig Bradley, president of Kane County Teachers Credit Union in Illinois, said his organization switched to American Share in the early 1980s because the federal credit union deposit insurance fund was charging higher premiums" (Allison 2002).
a prepaid card alternative, it did find that the worst prepaid cards have high, unavoidable charges, including activation and monthly fees, and that one lacked FDIC insurance. Four prepaid cards to avoid: AccountNow Gold Visa Prepaid Card (MetaBank), Reach Visa Prepaid Card (Tom Joyner), Redpack Mi Promesa Prepaid MasterCard and American Express for Target.
Among other uses, a tax on all trades might supplement the FDIC insurance fund to cover another derivatives disaster.
After that, the choices that state banks in Kansas made on FDIC insurance are compared to the choices these banks previously made about the Kansas voluntary state deposit insurance program.
If they continue to do well, we'll probably increase our investment to their $24 mil-lion cap." G4S gets 50 basis points in earnings credit from its banks, but once the banks sub-tract the FDIC insurance charge, the net value is about 37 basis points, he adds--and banks are threatening to reduce the earnings credit rate (ECR).
In the past, this meant that the FDIC insurance covered up to $100,000 of an investor's deposit.
Even though the coverage is based on the number of beneficiaries, any FDIC insurance payment would go to Larry, the account owner, rather than his children.
Despite less than spectacular rates, traditional bank CDs are appealing as a temporary reservoir for funds that will ultimately land in a long-term investment vehicle, says Freiburger, chiefly because they provide investors with FDIC insurance. Since CD rate spreads are narrow, he notes, "there's not much advantage to going out more than a year" with traditional CD investments.
The bank splits up your deposit into CDs with at least nine other participating banks, and each of those accounts is eligible for FDIC insurance up to $250,000.
(12) FDIC, FDIC Consumer News , Fall 2008 - Special Edition: Your New, Higher FDIC Insurance Coverage, Washington, DC, 2008, http://www.fdic.gov/consumers/consumer/news/cnfall08/ misconceptions.html.
With an increased number of bank failures, an understanding of the FDIC insurance coverage rules is an important component of an individual's investment strategy.
A footnote to another opinion drafted in 2007 adds: "OGC recognizes that for large agents and brokers, the current FDIC insurance limit of $100,000 may create considerable administrative burdens.