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Archive for the ‘FDIC History’ Category

The history of the FDIC started in 1933. In 1933, the banking crisis and the Great Depression were still eating up the US economy and confidence. You can read about the FDIC History here. In 1933, the FDIC was officiated created by the Banking Act of 1933. 

Before we discuss the Banking Act which created the FDIC in 1933, let's recap what happened in 1933 prior to the creation of the FDIC. 

Emergency Banking Act of 1933

After the Great Depression in 1929, the banking system deteriorated in the Winter of 1932-1933. At the time, Franklin D. Roosevelt was just elected as the President in November 1932. Speculations of currency devaluation hurt the economy even more. More banks failed. The US financial system was near total collapse.

On March 9, 1933, the House of Representative passed a bill which the Senate quickly approved and Congress then enacted the Emergency Banking Act of 1933. 

Banking Act of 1933

After the Emergency Banking Act of 1933 came the real Banking Act of 1933 which established the FDIC as a temporary agency to restore public confidence in the banking system as well as stabilize the financial system. A key element of the Banking Act of 1933 was the Glass-Steagal Act. 

What or Who created the FDIC?

Section 8 of the Glass-Steagal Act created the FDIC. 

The Banking Act of 1933 provided many jobs for the newly created entity, the FDIC of 1933. The Banking Act of 1933 required the FDIC to be appointed as the receiver for all national banks and as the receiver for insured state chartered banks as given by state laws. 

In addition to creating the FDIC in 1933, the Banking Act of 1933 also required the FDIC to organize a Deposit Insurance National Bank or DINB for paying off the insured deposits of each closed and failed bank. the DINB is a chartered national bank. The law concerning the DINB was later amended by the Banking Act of 1935. The FDIC was later allowed to pay depositors directly or through an existing bank.

Below is a summary of the FDIC history or the history of the Federal Deposit Insurance Corporation. The FDIC history below also provides the timeline for the FDIC activities throughout its history. Note that the FDIC history below is only a summary, there are much more to the history of the FDIC which are not discussed here. The laws below pertains the early FDIC history. 

Federal Reserve Act of 1913 Congress created the Fed or Federal Reserve System with the Federal Reserve Act of 1913.

Glass-Steagal Act of 1932

The US banking system collapsed with 5,711 banks failing daily from 1921 to 1929. The banking crisis of 1920s was at hand. President Herbert Hoover's administration recommended two solutions. The first created the Reconstruction Finance Corporation or RFC in January 1932. The second supported the Glass-Steagal Act of 1932. 

Federal Home Loan Bank Act of 1932

The banking system collapse and crisis led to the Great Depression of 1929 which spurred the creation of the Federal Home Loan Bank Act of 1932 to regulate savings and loans. The act also created the Federal Home Loan Bank Board or FHLBB. 

Banking Act and Emergency Banking Act of 1933

Then came the Banking Act and Emergency Banking Act of 1933. The Banking Act of 1933 created the FDIC. The history of the FDIC officially started in 1933. Read about the FDIC in 1933 here. 

Home Owner's Loan Act of 1933

The Great Depression of 1929 left 40% of home mortgages in default spiking foreclosure rates to record high. Congress then passed the Home Owner's Loan Act of 1933 to regular savings and loan industry but primarily to protect small homeowners. 

National Housing Act of 1934

In 1934, Congress passed the National Housing Act to reduce number of risky mortgages and loans. Subprime mortgages were heavily regulated. 

The Banking Act of 1935

The Banking Act of 1935 established the FDIC as a permanent agency of the federal government. 

Federal Deposit Insurance Act of 1950

The Federal Deposit Insurance Act of 1950 or the FDI made changes to the Banking Act of 1935 and reduced the power of the FDIC. 

Housing Act of 1954

The Housing Act of 1954 was enacted by Congress to amend the National Housing Act of 1934.