Economic Meltdown That Led To The Formation Of The Fdic
Banks failure in the US has been a recurrent phenomenon since the first bank failed in 1809. The highest number of bank failure was witnessed during the Great Depression, which hit the US in 1929 and lasted until 1939. During this global economic downturn, thousands of banks in the US collapsed creating panic among depositors
During the Great Depression, there were heated deliberations on federal deposit insurance to shield depositors from losses. The Congress, however, was initially occupied with resolving issues related to agricultural meltdown. Consequently, legislation on federal deposit insurance was delayed with only eight states having established deposit insurance funds policies after 1907.
However, the congress made a number of regulations on banking, especially from 1930, which include Hawley-Smoot Tariff Act of 1930, Reconstruction Finance Corporation Act of 1932, and Federal Home Loan Bank Act of 1932. Nonetheless, the legislation did not thwart the depression immediately but the situation got worse .
In 1933, the presidency of Franklin D. Roosevelt saw somewhat radical interventions including declaring a banking holiday on March 6, 1933. There was a further fall of about 4,000 banks and 1,700 S& Ls. More legislations including Emergency Banking Act of 1933 and The Securities Act of 1933 were enacted.
What Is The Purpose Of The Federal Deposit Insurance Corporation Quizlet
The Federal Deposit Insurance Corporation is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
A Prohibition Against Deposit Production Offices
Regulations
The appropriate Federal banking agencies shall prescribe uniform regulations effective June 1, 1997, which prohibit any out-of-State bank from using any authority to engage in interstate branching pursuant to this title,1 or any amendment made by this title 1 to any other provision of law, primarily for the purpose of deposit production.
Guidelines for meeting credit needs
Regulations issued under subsection shall include guidelines to ensure that interstate branches operated by an out-of-State bank in a host State are reasonably helping to meet the credit needs of the communities which the branches serve.
Limitation on out-of-State loans
Limitation
Regulations issued under subsection shall require that, beginning no earlier than 1 year after establishment or acquisition of an interstate branch or branches in a host State by an out-of-State bank, if the appropriate Federal banking agency for the out-of-State bank determines that the bank’s level of lending in the host State relative to the deposits from the host State is less than half the average of total loans in the host State relative to total deposits from the host State for all banks the home State of which is such State
the appropriate Federal banking agency for the out-of-State bank shall review the loan portfolio of the bank and determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank in the host State and
Considerations
Branch closing procedure
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How To Confirm A Bank’s Fdic Status
If you are shopping around for a new bank and you want to ensure it is FDIC-insured, the quickest and easiest way is to go to the FDIC’s search feature on its website. Enter information like the name of the bank, its location, and its web address, and it should show up in the search if it is FDIC-insured. Banks that are insured also should have the FDIC logo on its front door and elsewhere in the bank.
Each FDIC-insured bank also has an FDIC certificate number, which you should be able to get from the bank simply by asking for it. That number can expedite your search on the FDIC website.
A Participation By State Nonmember Insured Banks In Lotteries And Related Activities
Prohibited activities
A State nonmember insured bank may not
deal in lottery tickets
deal in bets used as a means or substitute for participation in a lottery
announce, advertise, or publicize the existence of any lottery or
announce, advertise, or publicize the existence or identity of any participant or winner, as such, in a lottery.
Use of banking premises prohibited
A State nonmember insured bank may not permit
the use of any part of any of its banking offices by any person for any purpose forbidden to the bank under subsection , or
direct access by the public from any of its banking offices to any premises used by any person for any purpose forbidden to the bank under subsection .
Definitions
As used in this section
The term “deal in” includes making, taking, buying, selling, redeeming, or collecting.
The term “lottery” includes any arrangement, other than a savings promotion raffle, whereby three or more persons advance money or credit to another in exchange for the possibility or expectation that one or more but not all of the participants will receive by reason of their advances more than the amounts they have advanced, the identity of the winners being determined by any means which includes
a random selection
a game, race, or contest or
any record or tabulation of the result of one or more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner.
Regulations enforcement
Effective Date
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R Payments On Foreign Deposits Prohibited
In general
Notwithstanding any other provision of law, the Corporation, the Board of Governors of the Federal Reserve System, the Resolution Trust Corporation, any other agency, department, and instrumentality of the United States, and any corporation owned or controlled by the United States may not, directly or indirectly, make any payment or provide any assistance, guarantee, or transfer under this chapter or any other provision of law in connection with any insured depository institution which would have the direct or indirect effect of satisfying, in whole or in part, any claim against the institution for obligations of the institution which would constitute deposits as defined in section 1813 of this title but for subparagraphs and of section 1813 of this title .
Exception
Subsection shall not apply to any payment, assistance, guarantee, or transfer made or provided by the Corporation if the Board of Directors determines in writing that such action is not inconsistent with any requirement of section 1823 of this title .
Discount window lending
No provision of this section shall be construed as prohibiting any Federal Reserve bank from making advances or otherwise extending credit pursuant to the Federal Reserve Act to any insured depository institution to the extent that such advance or extension of credit is consistent with the conditions and limitations imposed under section 10B of such Act [ 12 U.S.C. 347b
Where Can I Go If I Still Have Questions
- You can call FDIC toll-free at 1-877-ASK-FDIC from 8:00 am until 8:00 pm , Monday through Friday, or contact them online at www.fdic.gov.
- You can also call Wells Fargo directly at 1-800-869-3557, 24 hours a day, or visit one of our many convenient banking locations.
The information and content provided on this non-Wells Fargo website is for informational purposes only. Such information is provided as a convenience to you, and Wells Fargo makes no warranties or representations as to its accuracy and bears no liability for your use of this information. Wells Fargo does not endorse and is not responsible for the content, links, privacy policy, or security policy of this non-Wells Fargo website link. The information made available to you is not intended, and should not be construed as legal, tax, or investment advice, or a legal opinion. You should contact your legal, tax and/or financial advisors to help answer questions about your specific situation or needs prior to taking any action based upon this information.
Investment and Insurance Products are:
- Not Insured by the FDIC or Any Federal Government Agency
- Not a Deposit or Other Obligation of, or Guaranteed by, the Bank or Any Bank Affiliate
- Subject to Investment Risks, Including Possible Loss of the Principal Amount Invested
Deposit products offered by Wells Fargo Bank, N.A. Member FDIC.
LRC-1021
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Insuring Against Bank Failure
A bank failure means that a bank is unable to meet its financial obligations to its depositors and creditors. Bank failures in the U.S. are rare there were none reported in 2021 and just four reported in 2020.
When a member FDIC bank fails, the FDIC steps in to protect deposits. The agency first attempts to complete the acquisition of the failed bank by another financial institution. Depositors dont lose access to their funds, and their accounts are simply moved to the acquiring bank.
If the FDIC cant find a financial institution to acquire the bank, then it will pay depositors directly. So if you have an account at a failed bank, the FDIC would cut you a check for the value of your insured deposits.
Covered Insured Depository Institutions Resolution Plans
To assist the FDIC in resolving an insolvent bank, the FDIC requires plans including the required submission of a resolution plan by covered institutions requirement under the Dodd Frank Act. In addition to the Bank Holding Company resolution plans required under the Dodd Frank Act under Section 165, the FDIC requires a separate Covered Insured Depository Institution resolution plan for US insured depositories with assets of $50 billion or more. Most of the largest, most complex BHCs are subject to both rules, requiring them to file a 165 resolution plan for the BHC that includes the BHC’s core businesses and its most significant subsidiaries , as well as one or more CIDI plans depending on the number of US bank subsidiaries of the BHC that meet the $50 billion asset threshold.
On December 17, the FDIC issued guidance for the 2015 resolution plans of CIDIs of large bank holding companies . The guidance provides clarity on the assumptions that are to be made in the CIDI resolution plans and what must be addressed and analyzed in the 2015 CIDI resolution plans including:
FDIC deposit insurance covers deposit accounts, which, by the FDIC definition, include:
- demand deposits , and negotiable order of withdrawal accounts
- outstanding cashier’s checks, interest checks, and other negotiable instruments drawn on the accounts of the bank
- accounts denominated in foreign currencies
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How To File A Claim With The Fdic
In the event of a bank failure, the FDIC will automatically step in and pay insurance to eligible account holders up to the insurance cap. You don’t have to file a claim. This happens automatically, and no action is needed on your part. Under federal law, the FDIC is required to make these payments as soon as possible. Usually, these payments are made within two business days after a bank shutters, but usually within a business day. As the bank’s customer, your account gets passed off to an FDIC-insured bank, where you’ll get a new account. The amount in your account will be the same as the insured balance you had at your previous financial institution, which had failed. Otherwise, you’ll receive a check for the balance that was protected.
Note this is only when your financial institution fails. Should you fall victim to identity theft or fraud, that doesn’t fall under what the FDIC protects. It’s a matter that your bank can handle and help with. And if you lost money through an investment account, insurance policy, or payment app, that’s also not something the FDIC handles.
B Disclosures With Respect To Certain Federally Related Mortgage Loans
Identity of beneficiary interest as condition for a loan report to Corporation
No insured depository institution, insured branch of a foreign bank, or mutual savings or cooperative bank which is not an insured depository institution, shall make any federally related mortgage loan to any agent, trustee, nominee, or other person acting in a fiduciary capacity without the prior condition that the identity of the person receiving the beneficial interest of such loan shall at all times be revealed to the insured depository institution, insured branch, or bank. At the request of the Corporation, the insured depository institution, insured branch, or bank shall report to the Corporation on the identity of such person and the nature and amount of the loan, discount, or other extension of credit.
Enforcement bank status
In addition to other available remedies, this section may be enforced with respect to mutual savings and cooperative banks which are not insured depository institutions in accordance with section 1818 of this title , and for such purpose such mutual savings and cooperative banks shall be held and considered to be State nonmember insured banks and the appropriate Federal agency with respect to such mutual savings and cooperative banks shall be the Federal Deposit Insurance Corporation.
(Sept. 21, 1950, ch. 967, §2, as added
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A Assessment Credits For Qualifying Activities Relating To Distressed Communities
Determination of credits for increases in community enterprise activities
In general
The Community Enterprise Assessment Credit Board established under subsection shall issue guidelines for insured depository institutions eligible under this subsection for any community enterprise assessment credit with respect to any semiannual period. Such guidelines shall
designate the eligibility requirements for any institution meeting applicable capital standards to receive an assessment credit under section 1817 of this title and
determine the community enterprise assessment credit available to any eligible institution under paragraph .
Qualifying activities
An insured depository institution may apply for for 1 any community enterprise assessment credit for any semiannual period for
the amount, during such period, of new originations of qualified loans and other assistance provided for low- and moderate-income persons in distressed communities, or enterprises integrally involved with such neighborhoods, which the Board determines are qualified to be taken into account for purposes of this subsection
any increase during the period in the amount of new equity investments in community development financial institutions.
Amount of assessment credit
for the first full semiannual period in which community enterprise assessment credits are available, the sum of
the amounts of assets described in paragraph and
for any subsequent semiannual period, the sum of
Adjustment of percentage
What Is Not Insured By The Fdic
- Wells Fargo, and it’s Bank and non-bank affiliates, also offers a range of products and investment accounts that do not qualify as deposits and are therefore not covered by FDIC insurance. Examples of non-deposit products that are not covered by FDIC deposit insurance include:
- Investments in mutual funds
- Contents of a Safe Deposit Box
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Functions Of The Fdic
The Federal Deposit Insurance Corporation directly supervises more than 4,000 banks to ensure they operate within the law and that investors funds are secured. The agency also acts as the primary federal regulator of banks chartered by state governments that do not join the Federal Reserve System. It ensures that banks comply with consumer protection laws such as the Fair Credit Billing Law, the Truth-in-Lending Law, Fair Debt Collection Practices Law, and the Fair Credit Reporting Law. Savings, checking, retirement, and other deposit accounts are insured for up to $250,000 per ownership category. However, the FDIC does not insure mutual funds, securities, money market accounts, or bonds.
The FDIC executes its mandate with the help of two components, the Advisory Committee on Economic Inclusion and the Office of International Affairs. The Advisory Committee on Economic Inclusion advises the FDIC on banking policies and initiatives and makes corresponding recommendations. The banking policies include reviewing basic retail financial services such as money orders, remittances, check cashing, stored value cards, and short-term loans. The Office of International Affairs helps the FDIC address global financial challenges that affect the deposit insurance system. It also provides technical assistance and training to foreign deposit insurers and bank supervisors.
Separability Of Certain Provisions Of This Chapter
The provisions of this chapter limiting the insurance of the deposits of any depositor to a maximum less than the full amount shall be independent and separable from each and all of the provisions of this chapter.
Section is derived from subsec. of former section 264 of this title . See Codification note set out under section 1811 of this title .
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C Assuring Consistent Oversight Of Subsidiaries Of Holding Companies
Definitions
For purposes of this section:
Board
The term “Board” means the Board of Governors of the Federal Reserve System.
Functionally regulated subsidiary
The term “functionally regulated subsidiary” has the same meaning as in section 1844 1 of this title.
Lead insured depository institution
The term “lead insured depository institution” has the same meaning as in section 1841 1 of this title.
Examination requirements
Subject to subtitle B of the Consumer Financial Protection Act of 2010 , the Board shall examine the activities of a nondepository institution subsidiary of a depository institution holding company that are permissible for the insured depository institution subsidiaries of the depository institution holding company in the same manner, subject to the same standards, and with the same frequency as would be required if such activities were conducted in the lead insured depository institution of the depository institution holding company.
State coordination
Consultation and coordination
If a nondepository institution subsidiary is supervised by a State bank supervisor or other State regulatory authority, the Board, in conducting the examinations required in subsection , shall consult and coordinate with such State regulator.
Alternating examinations permitted
Appropriate Federal banking agency backup examination authority
In general
Examination by an appropriate Federal banking agency
are conducted in accordance with applicable Federal law and
Withdrawals By Negotiable Or Transferable Instruments For Transfers To Third Parties
Notwithstanding any other provision of law but subject to paragraph , a depository institution is authorized to permit the owner of a deposit or account on which interest or dividends are paid to make withdrawals by negotiable or transferable instruments for the purpose of making transfers to third parties.
Paragraph shall apply only with respect to deposits or accounts which consist solely of funds in which the entire beneficial interest is held by one or more individuals or by an organization which is operated primarily for religious, philanthropic, charitable, educational, political, or other similar purposes and which is not operated for profit, and with respect to deposits of public funds by an officer, employee, or agent of the United States, any State, county, municipality, or political subdivision thereof, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, any territory or possession of the United States, or any political subdivision thereof.
“Depository institution” defined
For purposes of this section, the term “depository institution” means
any insured bank as defined in section 1813 of this title
any State bank as defined in section 1813 of this title
any mutual savings bank as defined in section 1813 of this title
any savings bank as defined in section 1813 of this title
any insured institution as defined in section 1724 1 of this title and
Fine
inserted provisions relating to deposits of public funds.
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