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FDIC Insurance

Mary Gormandy White
MN Federal Reserve Bank

If you have money deposited in a United States bank or thrift institution, your funds are insured by FDIC insurance.

What is FDIC Insurance?

During the years leading up to the formation of the FDIC, consumers lost significant sums of money as the result of widespread bank closures triggered by the stock market crash of 1929 and the ensuing events that resulted in the Great Depression. The Federal Deposit Insurance Corporation (FDIC) was established by the United States government in 1934, following the enactment of the Banking Act in 1933.

The FDIC is set up as an independent governmental agency, serving the important purpose of protecting the interests of consumers who deposit their money into United States banks and thrifts. In the unfortunate occurrence of a bank failure, depositors don't have to worry about losing their funds, up to the up to the maximum insured amount per depositor. This protection keeps bank failures from having a devastating impact on the overall economy. As of 2008, over three trillion dollars of bank and thrift deposits in more than 5,250 financial institutions were protected by FDIC insurance.

Who Pays for FDIC Protection?

Many people mistakenly believe that FDIC insurance is funded by tax payers. This is not accurate. Banks and thrifts must pay premiums for FDIC insurance coverage, and their monies collected by the agency are invested in Treasury Department securities. The combination of mandatory premium payments and profits earned on the securities investments goes into the FDIC insurance fund, which was more than $49 billion as of the fourth quarter of 2008.

FDIC Coverage

Only deposits in regulated banks and thrift institutions are covered by FDIC insurance.

What is Not Covered?

  • Annuities
  • Bonds
  • Life insurance policies
  • Mutual funds
  • Safe deposit box contents
  • Securities
  • Stocks
  • Treasury Securities

What is Covered?

  • Bank and thrift institution deposit accounts
  • Certain types of retirement accounts
    • Individual Retirement Accounts (IRAs)
    • Keogh tax deferred pension plans

Coverage Limits

Historically, FDIC insurance has covered up to $100,000 for each depositor, per protected financial institution. In October of 2008, this limit was raised to $250,000 on a temporary basis. This higher limit will be in effect through 2009, after which a decision will be made regarding the future covered deposit maximum. To learn the specifics of FDIC coverage as applied to your personal or business accounts, see the electronic deposit insurance estimator (EDIE) published on the FDIC's website.

Structure of the FDIC

As with all federal agencies, the FDIC is headquartered in the nation's capital. In addition to the Washington, D.C. headquarters, the FDIC also has six regional offices and numerous field offices located throughout the United States.

The responsibility for overseeing the FDIC lies with the agency's Board of Directors (BOD). There are five BOD members, each of whom is a presidential appointee. Senate confirmation is required for each board member. To prevent the reality or perception of partisan management, there is a requirement that a maximum of three of the board members can be from the same political parties.

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FDIC Insurance