FDIC

Examples of FDIC in the following topics:

• The Glass Steagall Banking Act

  • It depends how FDIC handles the bank failure.
  • FDIC receives its funding from insurance premiums.
  • The FDIC uses two methods to deal with bank failures.
  • Thus, the FDIC rarely uses the first method because the FDIC could pay out millions or billions in claims.
  • If the FDIC cannot find a buyer, then FDIC can grant extra incentives, such as low-interest rate loans from the FDIC, or the FDIC buys the problem loans from the failed bank's portfolio.

• The Federal Deposit Insurance Corporation (FDIC)

  • As of April 16, 2012, the members of the Board of Directors of the FDIC are Martin J.
  • The FDIC promotes public confidence in the United States financial system by insuring depositors for at least $250,000 per insured bank.
  • Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.
  • The FDIC insures more than $7 trillion of deposits in U.S. banks and thrifts—deposits in virtually every bank and thrift in the country .
  • The FDIC Improvement Act of 1991 limits regulators' discretion as to when to close troubled financial institutions (FIs).

• Websites

• The Savings Association Insurance Fund (SAIF)

  • Between 1989 and 2006, there were two separate FDIC funds–Bank Insurance Fund (BIF), and Savings Association Insurance Fund (SAIF).
  • Between 1989 and 2006, there were two separate FDIC funds—the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF).
  • The FDIC maintains the DIF by assessing depository institutions an insurance premium.
  • Typically, bank failures represent a cost to the DIF because the FDIC, as receiver of the failed institution, must liquidate assets that have declined substantially in value while, at the same time, making good on the institution's deposit obligations.
  • Between 1989 and 2006, there were two separate FDIC funds—the Bank Insurance Fund (BIF), and the Savings Association Insurance Fund (SAIF).

• Chapter Questions

  • Explain the role of the Federal Deposits Insurance Corporation (FDIC).
  • Identify the two methods the FDIC uses to handle a bank failure.

• Answers to Chapter 2 Questions

  • The Comptroller of the Currency, FDIC, and the Fed regulate the national banks.
  • The FDIC insures bank deposits up to $250,000 per person and not by the account.
  • The FDIC liquidates a bank's assets and refunds the deposits to the depositors, or the FDIC finds another bank to merge with the failed bank.
  • Then the FDIC will grant low-interest loans or buy the bad loans to make a bank merger more attractive.

• The United States Banking System

  • Federal Deposit Insurance Corporation (FDIC) insures deposits at member banks.
  • As of 2009, the FDIC had 8,195 member banks.
  • A state government agency regulates its state banks, and many states require their banks to join the Fed and/or FDIC.
  • Moreover, the FDIC insures deposits at savings institutions.
  • This agency also insures the deposits at credit unions while the FDIC does not.

• Discount Policy

  • The Fed along with FDIC could extend loans to restore the financial health of the bank.
  • The FDIC purchased 80% of the bank's stock and elected new management.
  • Thus, the U.S. government nationalized the bank because the bank became too big to fail while the Fed provided $3.5 billion in loans to the FDIC.

• The National Credit Union Administration (NCUA)

  • As the insurer and regulator of federally chartered credit unions, the NCUA oversees credit union safety and soundness, much like the FDIC.

• Commercial Banks