Insurance

Have you ever really listened to a bank commercial on tv or the radio?  At the end you will hear them say that they are a member of the Federal Deposit Insurance Corporation or FDIC.  What does that mean? It means that your funds are ‘backed by the full faith and credit of the United States government.’  That means if the bank folds, your money will be returned to you by the US government. 

I am asked almost daily about FDIC from clients.  They want to make sure that they wont lose a dime of their hard-earned money if anything happens to the bank.  I tell them they are insured and should be more worried about inflation than FDIC insurance, but that’s another battle. 

History

The FDIC was established in 1933 by Franklin D Roosevelt to create order in the financial industry.  All hell broke loose in the late 1920’s with the Great Depression and people were losing all their money that was just sitting in bank accounts.  Clients were withdrawing all of their money, and the banks eventually ran out.  When a bank runs out of money, they go under.  At that point, people lost all their money that was held by that bank. 

FDIC is an insurance on your money.  If the bank runs out of the green stuff, your money isn’t lost.  FDIC steps in and writes you a check that the bank couldnt cash.  Since the FDIC was created, no one has ever lost a penny to a bank failure (now fees are a different story). 

 

Who Pays For FDIC?…