Why is the fdic important today

These efforts arguably helped to stabilize the banking system and limit some of the impact of the crisis. It may use your deposit to make loans and other investments that can, in turn, make the bank money.

In the event that an FDIC-insured bank suffers a disastrous event — like many did when risky lending led to the widespread collapse of financial institutions in — the FDIC can step in and help out.

Making sure your bank is FDIC-insured can help protect your money. If you want to maximize your chances of keeping your money safe, you should look for a bank and account insured by the FDIC.

Image: Client and bank employee talking by counter. The FDIC helps protect insured deposits when an FDIC-insured financial institution fails and has helped restore stability of the banking system twice in the past 35 years. Advertiser Disclosure We think it's important for you to understand how we make money.

About the author: Lauren Hargrave is a writer from San Francisco who focuses on technology, finance and wellness. Share your feedback. Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. Please try again later. Best Ofs. Best Savings Account. Best CD Rates by Term. Fintech And Online Banking. More from. Napoletano Contributor. By Ben Gran Contributor. Information provided on Forbes Advisor is for educational purposes only.

Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. The FDIC is not funded by congress, but instead member banks pay premiums. Investing in a non-member bank could lead to a loss of assets if the bank fails.

The FDIC, or Federal Deposit Insurance Corporation, is an agency created in during the depths of the Great Depression to protect bank depositors and ensure a level of trust in the American banking system. After the stock market crash of , anxious people withdrew their money from banks in cash, causing a devastating wave of bank failures across the country. Many analysts expected the United States economy to make a quick and robust recovery after the stock market crash of Three previous market contractions—in , and —had lasted an average of 15 months each.

A series of bank panics in and , however, turned a typical economic downturn into the Great Depression , which was the longest and deepest economic downturn in the history of the United States. Questionable managerial and financial practices caused the collapse of Nashville, Tennessee-based Caldwell and Company, one of the largest banking chains in the South, in November Customers began to panic, withdrawing their funds in cash from other banks.

Across the country, banks ran out of cash and faced sudden bankruptcy. Americans became concerned the United States would do the same. Many customers withdrew their deposits from banks and converted their money to gold. This caused even more banks to fail and depleted U. The United States sunk deeper into an unprecedented economic meltdown. Within days of taking office in , President Franklin D. Roosevelt passed emergency legislation that would begin to restore confidence in the American banking system.

It also separated commercial and investment banking and for the first time extended federal oversight to all commercial banks. Small, rural banks were in favor of deposit insurance.

Larger banks opposed the measure.