Federal Deposit Insurance Corporation Essay

The Federal Deposit Insurance dope was created by the Banking Act of 1933 in response to the banking crisis that faced the nation after the stock market break up on Black Tuesday, October 29, 1929. Although the FDIC has grown and changed since then, its take aim is let off the same to warrant the safety of bank alluviations up to a certain amount. Until repennyly, that amount was $100,000 exclusively Congress, in response to the current stinting crisis has temporarily increased FDIC deposit insurance from $100,000 to $250,000 per depositor through December 31, 2009. (Who, n.d.)All of the banks that are members of the FDIC must wedge to certain liquidity and reserve requirements in order for the banks and their depositors to benefit from the insurance. (Overview, n.d.) If a bank becomes undercapitalized the FDIC issues a warning. If the undercapitalization worsens it can take other corrective measures which whitethorn ultimately result in the FDIC taking over management. All of this is meant to deem the confidence of depositors so that there are no runs on the banks as so often happened in past history.The History of the FDICTo understand the enormousness of the Federal Deposit Insurance Corporation in todays economic market one must look to the history that conduct up to its establishment as part of the Banking Act of 1933. After the settle of the stock market in 1929 the United States fell into the longest economic depression in its history from 1929 to 1939. Since loans that were made to stock market speculators were not being repaid after the crash, some(prenominal) banks failed and bank panics were commonplace. This led to their depositors losing money, which only served to arouse the depression further.The bank failures of the early 1930s were not the first in the history of the United States, but they were the most severe to date. President Franklin Delano Roosevelt precept the need to stem the tide of failures by en do working the Bankin g Act of 1933. Part of this act set up the FDIC, gave it dominance to regulate and insure banks, and the act also provided its funding.The purpose of the FDIC was to build the confidence of the American people in their banks and to underwrite them that their bills would be safe, at least up to a certain amount. (FDIC Timeline, n.d., 1930) This is still the general purpose of the FDIC, although much has changed since its birth in 1933. According to the FDIC website since the kill of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure. (Who, n.d.)When the FDIC was established in 1933 it was a temporary agency. But just two geezerhood later the Banking Act of 1935 made it a permanent agency. (FDIC Timeline, n.d., 1930) This was the first of many changes and adjustments to the FDIC over the years. The Federal Deposit Insurance Act of 1950 raised the insured amount to $10,000 and that amount has increased steadily until now, it is $250,000. The 1950 legislation also gave the FDIC the part to lend to any insured bank in danger of oddment if the operation of the bank is essential to the local community, and authorized the FDIC to examine interior(a) and state member banks for their insurance risk. (Important, n.d.)In 1989, in response to the savings and loan crisis gripping the nation, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) added two to a greater extent functions to the FDIC, eliminating the Federal savings & Loan Insurance Corporation (FSLIC). The FDIC was given the authorisation to oversee and administer two other insurance funds that replaced the FSLIC the Savings Association Insurance Fund (SAIF) and the Bank Insurance Fund (BIF). (FDIC, n.d.) shut up more powers were given to the FDIC by the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991. This act addressed issues that the FIRREA did not, giving the FDIC more authority as well as mor e obligations. The FDIC continued to grow some(prenominal) in funding and authority until it r each(prenominal)ed the status that it holds in our economy today.The twist of the FDICThe FDIC of today is run by a five-member board of directors headed up by Chairman of the be on, Sheila C. Bair who has been in that post since she was sworn in on June 26, 2006. She testament serve a five year term and at the consummation of that term, she will remain on the mesa of Directors until 2013. Each Chairman of the bill of fare is appointed by the President to serve a five-year term and each appointment is subject to the approval of the US Senate. (Barrymore, n.d.) Since the chairman is appointed by the President, she can also be removed by the President.The other members of the Board are the Vice Chairman Martin J. Gruenberg, Director Thomas J. Curry, Comptroller of the property John C. Dugan, and Director of the Office of Thrift Supervision John M. Reich. (Board, n.d.) The Board meets well-nigh once a month in either sensory(a) or closed meetings. The public may attend open meetings as a result of the Government in the Sunshine Act. (FDIC Board Meetings, n.d.) In 2008 there were ten open meetings held.The FDIC has seven divisions. The family of Finance directs the accounting and auditing aspects the category of Information Technology oversees and maintains the computer network of the organization the Division of Administration provides administrative support the Division of Supervision and Consumer Protection conducts reviews to assure that each bank is sound and that its internal controls are adequate the Division of Resolutions and Receiverships goes into action when a bank is in danger of failing the juristic Division handles the corporations litigation and the Division of Insurance and Research keeps an eye on the economic health of the nation, examining business activity, markets, etc. (FDIC Divisions, n.d.)To run these seven divisions the FDIC employs about 5,000 people in its Washington, D.C. headquarters as well as in six regional offices and in field offices around the country. (Who, n.d.)