What Does FDIC Insured Mean?

What does FDIC insured mean? The Federal Deposit Insurance Corporation was needed by the government to restore consumer confidence in the national banking system after the banks failures in the 1920s and early 1930s. It does this by insuring deposits in accredited banks and thrifts u.

"The letters FDIC stand for Federal Deposit Insurance Corporation. This is an independent agency of the United States government," says Sharon Lee, the Executive Vice President and Director of Client Services of American National Bank, who has thirty years in the banking industry.


The Banking Act of 1933, also known as the Glass-Steagall Act, established the Federal Deposit Insurance Corporation as a temporary agency. Later the Banking Act of 1935 made the FDIC a permanent agency of the United States government. FDIC legislation was scattered through many areas so the government passed the Federal Deposit Insurance Act of 1950 to consolidate all the FDIC-related legislation into one Act. Chapter III of Title 12 contains the regulations regarding the FDIC.




The Federal Deposit Insurance Corporation was needed by the government to restore consumer confidence in the national banking system after the banks failures in the 1920s and early 1930s. It does this by insuring deposits in accredited banks and thrifts up to $100,000. Once the FDIC became active on January 1, 1934, no one has lost any insured money after a bank failure. "The FDIC protects you against the loss of your insured deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government," said Sharon Lee.

The integrity and independence of the FDIC relies on the fact that it receives no Congressional appropriations. The agency is funded by premiums paid by member banks and thrifts for deposit insurance coverage. The FDIC also receives money from its earnings on U.S. Treasury securities. If a bank is national, membership in the FDIC is mandatory. In addition, banks that are members of the Federal Reserve System are also required to be members of the FDIC. If the bank does not join the Federal Reserve System, the FDIC is still the primary federal regulator.

The word deposit in the name means just that. The Federal Deposit Insurance Corporation only deals with deposits. Other financial and savings options such as mutual funds, corporate money market accounts or securities are not insured. Any person can log onto the FDIC's website and access calculators to determine how much of your money is insured. Because there are different categories of ownership, you may have more or less of your money insured than you think. Forms and other information is easily located and downloaded from their website. The FDIC has a five-person board of directors as management. They are appointed by the President of the U.S. and confirmed by the Senate.

If a member bank or thrift fails, the FDIC steps in immediately. It has several options for dealing with the failed institution. The most used technique involves selling the deposits and loans from the failed bank to another active bank. This makes the customers of the failed bank members of the new one. Typically, this action is almost invisible to the customer's eyes. The Depository Institutions Act of 1982 expanded the FDIC powers in assisting troubled banks and created the Net Worth Certificate program.

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