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IS THE FDIC A USELESS FEDERAL AGENCY ?
Jan 31, 2025
The Federal Deposit Insurance Corporation (FDIC) insures your bank deposit is protected up to $250,000. But there's talk by the current administration to eliminate the agency as part of an effort to reduce the size of government and loosen federal regulations saying its a useless federal agency. What are the ramifications of its abolition?
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this headline isn't just fantasy it
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could become reality the fact of the
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matter is eliminating the FDIC is a
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topic under serious discussion right now
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but what is the FDIC FDIC stands for
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Federal Deposit Insurance Corporation
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and was invented in the
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1930s to deal with uh Bank runs when
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President Franklin Roosevelt signed the
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Banking Act of 1933 into law individuals
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families and businesses could for the
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first time know their Bank deposits were
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safe now to just suddenly eliminate it
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and say we're not going to do that
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function anymore and give the treasury
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Department uh some ability to try and
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replace the money is that a wise move I
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would probably not recommend that no I
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think the system has worked very very
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well in fact it's rare that we have runs
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on the banks anymore you see Banks don't
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have all of your money stored inside
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their vaults it's invested and used
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elsewhere if you withdraw a small amount
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of cash it's no problem but if too many
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people try and take all of their money
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out of the bank at the same time it
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causes a run and people may panic
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because there's not enough cash on hand
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to pay everybody's full deposits at once
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but the FDIC ensures those deposits up
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to
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$250,000 so if the bank fails you don't
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lose a penny of the money you deposited
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how do we know it works well it's
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happened before 2008 a Great Recession
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hammers Global markets millions of
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households lose their homes to
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foreclosure and more than 500 Banks
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would ultimately fail the FDIC covered
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all of those losses through its
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insurance now the agency makes Banks pay
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premiums into a Deposit Insurance Fund
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no consumers pay those premiums only
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banks but some of the current
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Administration believe the agency has to
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be abolished to reduce the size of
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government and also to loosen
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regulations there are folks who take a
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more libertarian point of view to
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government and say well Banks can
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develop their own insurance plan why do
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we have to have the government backing
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this should Banks should be required to
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set up some kind of an insurance company
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to back stop them I have no trouble with
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that being investigated but again the
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system that we have now I think has
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worked very very well we signed some
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executive orders now the FDIC can't be
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abolished with just the stroke of a pen
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as an executive order Congress has to
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get involved will Congress go along with
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something like this do you think oh I
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would I would guess not I'd be highly
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surprised even with a republican
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majority in both the houses that uh that
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that would be passed self Financial
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experts believe if the FDIC is abolished
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it will have a domino effect undermining
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our economy as well as creating turmoil
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in our lending system working for you
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I'm consum investigator St spria
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