TheFederal

DepositInsuranceCorpora
tion
Kiara Rush, Juliana Demicco,Briana Doyle
Introduction

Establishedin1933
An independent agency of the federal government
Thousands of bank failures between the 1920s and early 30s
Identifies, monitors, and addresses any risks to the deposit insurance funds
Shuts down failed institutions as well as arrange mergers of other financial
institutions
FDIC insures up to $250,000 per depositor when banks fail
History

The "roaring twenties" began a newfound wealth and people were spending money on
things that they thought they could afford
The McFadden Act of 1927 established the Federal Reserve Board, which was created
as a permanent central bank
By 1929, there were over 17,000 state banks and 8,000 national banks
October 28, 1929: Black Monday, the Dow dropped almost forty points
October 29, 1929: Black Tuesday,the Dow dropped another thirty points
Ten year long depression was the worst that the U.S. has ever experienced
History

Many of the banks failed because they made loans for stock market speculators that
would never be repaid
1932-1933: Peak of the Great Depression, FDIC was created
March 6, 1933: Franklin D. Rooseveltdeclared a banking holiday
FDIC began examining about 8,000 state-chartered banks that were not members of the
Federal Reserve Board
The Banking Act of 1933 established the FDIC as a temporary government corporation
and gave it the authority to offer deposit insurance
The total losses of depositors from bank failures was almost $1.5 billion over four years
The Glass-Steagall Act separated commercial and investment banks
Funding

In 1934, the maximum deposit insurance was only $5,000 per depositor and account
Now each depositor is insured up to $250,000
This includes savings, checking, independent retirement accounts and other deposit
accounts
funded through premiums paid by the banks that they support with their deposit
insurance and from interest that they have earned on U.S. Treasury securities
More than half of the financial institutions in the U.S. are insured by the FDIC (over
7,000)
Many ways that the FDIC can use to help solve the financial problems of a failed bank
Most popular is to sell deposits and loans of that failed bank to another institution
PriorFinancial Crisis'

OPEC oil embargo of 1973

Iran, Iraq, Kuwait, Saudi Arabia, Venezuela
Egypt-Israeli War
Early 1980s chaos
"If unemployment breaks 10%, we're in big trouble." Unemployment peaked the following November
at 10.8%
Black Monday October 1987
Internet and tech industries stock market crash
Dow Jones drops 508 points-dropped 43%
FDIC pushed money into banks and by the end of the month, the stock market rose 15%
Dot-com crash
The number of tech IPOs traded on the open market dropped from 457 in 1999 to 76 in 2001.
 Financial Crisis of 2008

The Great Recession

SubprimeBorrowers
Pooled Securities
Housingbubbleburst
326 banksfailed from 2007-2010
Recovering from theGreat
Recession

The AmericanRecovery and Reinvestment Actof 2009

Worked with the Federal Reserve
Conclusion

Without the FDIC, we may not have been able to recover from the Financial Crisis of
2008
Bank failures are preventable, but they usually occur because:
Imbalance between the banks risk and return
Poor management of their risks
Overall, the FDIC has made positive impacts on financial crisis
Billions of depositors would have lost money and banks would have never been able to
recover if the FDIC was not established