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What is an example and the implication of the FDIC?

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checkyyy | (Level 1) Honors

Posted June 3, 2013 at 5:55 PM via web

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What is an example and the implication of the FDIC?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted June 3, 2013 at 6:16 PM (Answer #1)

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The FDIC is the Federal Deposit Insurance Corporation.  It is a governmental agency.  There cannot be an example of a governmental agency.  All there can be is an example of what that agency does.  The FDIC exists to insure the money that people put in banks.  If a person has less than a certain amount of money in the bank, and that bank goes broke, the person does not lose their money.  Instead, the FDIC refunds that money to the person.  For example, when the large Washington Mutual bank failed in 2008, the FDIC had to work to ensure that the banks depositors would not lose their money.

The implication of the FDIC is that the American economy can be more stable than it would be without that agency.  Because we have the FDIC, we can put money in banks and be assured that we will get that money back.  That means that we can be more likely to trust banks.  This helps our economy because it increases the amount of money that will be put in banks.  That increases the amount of money that banks can lend and increases the amount of economic activity that can take place.

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