4FDIC Insurance: The Background Cause
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) was launched in 1934, after the banking collapse that began in 1930, to protect small depositors in commercial banks, even though FDR, while signing the bill, conceded that in the future, it would “place a premium on unsound banking” and “involve the government in probable loss.” (He was correct.)1 Over the years, the amount of deposit insurance coverage has been increased until at the beginning of the financial crisis, the insurance coverage was at $100,000. In addition, a family of four could use a variety of techniques to increase its coverage to more than $500,000. The Troubled Asset Relief Program (TARP)—which I will discuss later—raised the coverage ...
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