What is the FDIC?
FDIC stands for Federal Deposit Insurance Corporation and is an independent agency of the federal government. During the 1920's and 1930's there was a great deal of financial hardship. It was in 1933 that the FDIC was created with the intention of putting trust back into the banking system. The FDIC insures deposits in banks up to $250,000. It does not insure things such as mutual funds, securities, etc. In addition to this, they also make sure that banks are compliant with consumer protection laws. The headquarters for the FDIC is located in Washington DC and is headed by a board of directors. All of the directors are appointed directly by the President of the United States.
The Banking Act of 1933 had the provision which led to the creation of the Federal Deposit Insurance Corporation or FDIC. The FDIC was intended to safeguard depositors in case a bank collapsed and to protect them from losing all their funds.
The FDIC is an insurance firm that is run by a yearly fee which banks that join it have to pay. Its role is to pay depositors a sum of up to $250,000 as of 7/21/2010 in case the bank fails. The FDIC was started in 1933 and by 1935 almost 14,000 banks had joined it. By 2000, approximately 98% of all banks are insured by the FDIC.
The FDIC has brought back the confidence of people in the banking system as they know that their funds deposited in the banks are safe and even if a large number of banks were to fail, the FDIC is in a position to secure deposits up to $250,000 as it has access to money from the US Treasury.