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Posts Tagged ‘what happened in 1933’

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.