ipl-logo

Federal Deposit Insurance Corporation (FDIC) After The Great Depression

485 Words2 Pages

The Economist states “Finance is not merely prone to crises, it is shaped by them.” This quote resonates throughout past financial crises, and is on the forefront of every government enacted program or reform. These programs and reforms enable finance to enhance the lives of society tremendously, such as the formation of central banks and stock exchanges, but which only originate in a post-financial crisis. One of the successful government enacted programs was the implementation of the Federal Deposit Insurance Corporation (FDIC) following the Great Depression of 1929. Before reviewing the government enacted programs during the 2007-2009 crisis, a brief history the FDIC The closing of the Federal Reserve in 1929 began the worst period in American Finance. Almost “11,000 banks closed its doors, causing money supply to decrease by over 30% and the unemployment rate to skyrocket to more than 25%.” The …show more content…

The FDIC’s main objective in 1933 was to protect those who deposit money in the banks. This service protects money that is a part of the customer’s “checking, savings, trust and money market deposit accounts, individual retirement accounts, or IRAs, and certificates of deposit, or CDs.” However, The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investments are purchased at an insured bank.” Initially the FDIC protected $2,500 of deposits per customer which aimed to reduce the costs of bank failure. Limiting depositor losses enabled income, the money supply and buying power to be protected. Subsequently, “depositors could trust the FDIC, and would not queue up at banks at the slightest financial

Show More
Related

Apush 2003 Dbq

141 Words | 1 Pages

In Addition to maldistribution stood the credit structure of the economy, some farmers were in deep land mortgage debt, so they lowered their crop prices in order to regain credit, and because the farmers were no longer accountable for what they owed banks. Across the nation the banking system found themselves in constant trouble. In America both small and large bankers were concerned for their survival, so they began investing recklessly in stock markets and granting unwise loans. These unconscious decisions would lead a large consequence, such as families losing their life savings and their deposits became uninsured. “ More than 9,000 American banks either went bankrupt or closed their doors to avoid bankruptcy between 1930 and 1933.”Although

Read More

Rhetorical Analysis Of Fdr First Fireside Chat

283 Words | 2 Pages

In the early days preceding the first fireside chat on 12, March 1933, the American people’s confidence in the banking system was at an all-time low. As the confidence in the banking system began to erode, people began to make runs and withdrawing all their money leaving the banks empty and foreclosing many of the smaller rural banks. Banks continued to close despite the government's best efforts, as a result, President Franklin D. Roosevelt’s (FDR) instituted the banking holiday on 6 March 1933: closing all the banks preventing people from withdrawing all their assets, foreclosing, even more, banks and making the situation worse. When the banks closed FDR started to initiate a plan to inform the American people about how the banks worked, what they do with the money, and how he and the government are going to solve the issue.

Read More

The FDIC: The Great Depression

245 Words | 1 Pages

The FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. The FDIC was a provision of the Glass-Steagall Act. During the nine year period from 1921-1929 more than 600 banks failed each year. The failed banks were small banks operating in the rural suburban areas and held the deposits of mostly farmers and blue collar folks. When banks fold and continue to do so, people will start to worry about their money in any bank.

Read More

The Fdic Pros And Cons

136 Words | 1 Pages

FDIC, which stands for Federal Deposit Insurance Corporation, was formed in 1933 after the bank failures during the 20’s. The FDIC provides insurance for deposits at banks. The FDIC can provide up to $250,000 in insurance for deposits per bank. SSA, Social Security Administration, was created in 1935 and provides social security benefits like retirement and disability benefits. TVA, Tennessee Valley Authority, was created to provide electricity, flood control, and economic development to the region known as the Tennessee Valley.

Read More

Great Depression Dbq Essay

768 Words | 4 Pages

When many people bought stocks on margin, with the mindset of “buy now pay later”, eventually caused the Stock Market Crash of 1929. When the stock market crashed in 1929, most people ran to their banks demanding their life savings back in cash, but the banks didn’t have enough money to do so, therefore they went out of business. This was the banking crisis. According to document 2, the caption reads, “Disbelief turned to panic as people besieged [stormed] the banks (this one was in New Jersey) trying to withdraw their life’s savings — often too late.” This helps demonstrate the mentality of many Americans who had their life’s savings in the bank, and how this conflict of banks going out of business started.

Read More

Great Depression Dbq

497 Words | 2 Pages

The agricultural economy was suffering from drought and falling food prices, and the banks had a overload of large loans that could not be liquidated. In the summer of 1929, America’s economy suffered a mild recession. Consumer spending plummeted and the number of unsold products increased, causing factories to slow production of the goods. As a result, stock prices rose so high that there was no way they could be justified by expected future earnings. By this time, people were performing bank runs, this meant that people were going to the banks and withdrawing all their money in fear of losing it when the banks shut down.

Read More

Dust Bowl Dbq

1117 Words | 5 Pages

During the 1920’s there was a sense of a booming economy leading more people to buy on credit with the economy being stable. However after the stock market crash droves of people rushed to withdraw their money. This caused many problems for the banks as they had invested money into the stock market themselves, many closed down leaving millions questioning where their money had gone. This is the main reason people viewed banks as untrustworthy and feared giving them there hard earned money. This is why President Roosevelt created programs such as the FDIC to create a trust between the people and the government.

Read More

Delano Roosevelt Rhetorical Analysis Essay

1574 Words | 7 Pages

The Stock Market Crash of 1929 fell with a domino effect, driving people out of businesses, causing employers to fire workers because of money shortage, consequently, those workers to go broke and become homeless, and eventually setting the country into the hardly-reversible state of hardships that came with the Great Depression. Quite obviously, the country was impoverished. Panic arose as people started to withdraw all their savings from the banks as soon as they heard that the stock market had plunged, trying to keep their money safe and secure, manually. After breaking down the core issues of the Depression in his “Fireside Chat”, Roosevelt claimed, “I can assure you that it is safer to keep your money in a reopened bank than under the mattress.” This advice stuck with many after hearing their president speak so knowledgeably about the matter.

Read More

Great Depression Dbq

692 Words | 3 Pages

This swept throughout the U.S and by early 1933 thousands of banks closed. In Document ten and eleven Americans were getting caught up with financial problems and could not manage it all and they only brought what they could afford only (Elmer Davis, “If Hoover Fails,” Harpers Monthly, March

Read More

Great Depression Dbq

1331 Words | 6 Pages

This dark time in history began with the collapse of the stock market in October of 1929. Wall Street became unstable and in turn wiped out millions of investors, which caused the United States to fall into the longest and deepest economic crisis in its history. Although the stock market crash of 1929 started the chain of events, other events also fueled its decline. First, firms in America earned record profits during the 1920s and reinvested much of those funds into expansion. By 1929, companies had expanded to the “bubble point”.

Read More

Black Tuesday: The Cause Of The Great Depression

587 Words | 3 Pages

These beliefs allowed for the buildup of loans and credit beyond what banks were able to cover financially, and once Black Tuesday sparked the beginning of the Great Depression banks found themselves in financial despair. The inability for banks to pay their customer, which had positive balances force these financial institutions to close their doors. This additional factor in the Great Depression drove the government to develop regulated banking practices. The Emergency Banking Act and the later development of the Federal Deposit Insurance Corporation assisted the availability of federal loans and the protection of depositor’s money (Murrin et al.,

Read More

A History Of The Federal Reserve Why Was It Formed?

1007 Words | 5 Pages

Due to the widespread panics that were causing banks to go out of business, banks were in need an emergency reserve so in times of panic. In 1907, the sever panic wreaked havoc on the banking system as the banks did not have enough supply to keep up with the demand of the withdrawals (In Plain English, n.d.). Wide spread panic in

Read More

New Deal Dbq

786 Words | 4 Pages

FDR came up with a plan to put faith back into the banking system as well as insure the customer’s money was going to be their when they needed it. This program was called the FDIC “President Roosevelt signs this act on June 16, 1933, to raise the confidence of the U.S. public in the banking system by alleviating the disruptions caused by bank failures and bank runs. From 1929 to 1933, bank failures resulted in losses to depositors of about $1.3 billion. Before the FDIC was in operation, large-scale cash demands of fearful depositors often struck the fatal blow to banks that might otherwise have survived. Since the FDIC went into operation, bank runs no longer constitute a threat to the banking industry.”

Read More

New Deal Initiatives

1251 Words | 6 Pages

FDR was looking forward into the future of the economy of the United States with this new policy developed and also with the creation of the FDIC or Federal Deposit Insurance Corporation. 
 The Federal Deposit Insurance Corporation was created in order to protect the money of the Americans in their certain choice of bank. One of the main and horrible effects of the Great Depression had on the American public was that all of the money that they had saved in back accounts were lost and couldn’t be replaced by the banks. A cruel way of loosing someones hard earnings and lifesavings. Which is why The FDIC (Federal Deposit Insurance Corporation), was created because what the FDIC did was that it protected the money of the customers if it was to ever get lost with a guarantee up to a quarter of a million.

Read More

How Did Sorkin Write Too Big To Fail Sparknotes

1467 Words | 6 Pages

Jonathan Ng HST-335 Book report In Andrew Sorkin’s book “Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--and Themselves,” readers are immersed into the narrative account of the financial crisis that gripped the U.S. in 2008 as told from the perspective of those who created it, the bankers, the traders, and the brokers. Sorkin, a mergers and acquisition reporter at The New York Times, makes it clear he will not delve too deeply into economic theory; rather, the book provides a fly-on-the-wall insight into the main actors of the financial crisis including Wall Street chief executives, Treasury Secretary Henry Paulson, and central bankers such as Timothy Geithner, Alan Greenspan, and Ben Bernanke. The premise behind the book and its title, "too big to fail," is that the financial institutions is so important to the U.S. economy that the central bank must take measures to prevent it from going bankrupt.

Read More

More about Federal Deposit Insurance Corporation (FDIC) After The Great Depression

Related Topics

Open Document