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The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance, which guarantees the safety of deposits in member banks, currently up to $250,000 per depositor per bank. The FDIC insures deposits at 7,723 (as of 11/18/2010) institutions. The FDIC also examines and supervises certain financial institutions for safety and soundness, performs certain consumer-protection functions, and manages banks in receiverships (failed banks). Insured institutions are required to place signs at their place of business stating that "deposits are backed by the full faith and credit of the United States Government." Since the start of FDIC insurance on January 1, 1934, no depositor has lost any insured funds as a result of a failure.
The FDIC’s satellite campus in Arlington, Virginia, is home to many administrative and support functions, though the most senior officials work at the main building in Washington
Bank sign indicating the original insurance limit offered by the FDIC of $2,500 in 1934.
The temporary increase in 2008 of the insurance limit to $250,000 was made permanent in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act. 2008 As a result of the financial crisis in 2008, twenty-five U.S. banks became insolvent and were taken over by the FDIC. However, during that year, the largest bank failure in terms of dollar value occurred on September 26, 2008 when Washington Mutual experienced a 10-day bank run on its deposits. 2009On July 31, 2009, the FDIC launched its Legacy Loans Program (LLP). This initiative is aimed at helping banks rid their balance sheets of toxic assets so they can raise new capital and increase lending. On August 14, 2009, Bloomberg reported that more than 150 publicly traded U.S. lenders had nonperforming loans above 5% of their total holdings. This is important because former regulators say that this is the level that can wipe out a bank’s equity and threaten its survival. While this ratio doesn’t always lead to bank failures if the banks in question have raised additional capital and have properly established reserves for the bad debt, it is an important indicator for future FDIC activity. On August 21, 2009, the 2nd largest bank, Guaranty Bank, in Texas became insolvent and was taken over by BBVA Compass , the U.S. division of Banco Bilbao Vizcaya Argentaria SA, the second-largest bank in Spain. This is the first foreign company to buy a failed bank during the credit crisis of 2008 and 2009. In, addition, the FDIC agreed to share losses with BBVA on about 11 billion of Guaranty Bank’s loans and other assets. This transaction alone cost the FDIC Deposit Insurance Fund $3 Billion. On August 27, 2009, the FDIC increased the number of troubled banks to 416 in the second quarter. That number compares to 305 just three months earlier. At the end of the third quarter that number jumped to 552. At the close of 2009, a total of 140 banks had become insolvent. This is the largest number of bank failures in a year since 1992, when 179 institutions failed. 2010On February 23, 2010, FDIC chairman Sheila Bair warned that the number of failures in 2010 could surpass the 140 banks that were seized in 2009. Commercial Real Estate overexposure has now been deemed the most serious threat to banks in 2010. On April 30, 2010, the FDIC used emergency powers to seize three banks in Puerto Rico at a cost of $5.3 billion. In 2010, 157 banks with approximately $92 billion in total assets failed. See also
From Wikipedia, the free encyclopedia : Deposit Funds |
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