Financial regulation in the United States

Dodd-Frank Act

Federal Reserve

Financial regulation by state

Key terms

Commercial bank •Credit union •Depository institution •Financial system •Investment banking •Securities

Hover over the above terms for definitions.

TheFederal Deposit Insurance Corporation (FDIC) is an independent government corporation that provides deposit insurance to banks. Deposit insurance covers a depositor's accounts dollar-for-dollar in the event of a bank failure or closing, ensuring that depositors do not lose their money as a result of a bank's actions. Formed in 1933, the initial FDIC insurance limit was $2,500. This limit was raised periodically by subsequent legislation. TheDodd-Frank Act, passed in 2010, established a coverage limit of $250,000.^[1]

Background

Administrative State
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According to the Federal Deposit Insurance Corporation (FDIC), numerous bank failures in the 1920s and early 1930s had eroded trust in the nation's banking system. Bank failures occur when banks are unable to meet their financial obligations and thus become insolvent. As banks failed, depositors began withdrawing money from their own banks, fearing that they too would also become insolvent. These mass withdrawals, referred to as bank runs, further eroded trust in the banking system, as banks closed after being unable to handle the volume of withdrawal requests.^[2]

In response, President Franklin D. Roosevelt signed theBanking Act of 1933 (also known as the Glass-Steagall Act) into law on June 16, 1933. This act established the FDIC as a government corporation to insure bank deposits, a temporary designation that was later made permanent with the Banking Act of 1935.^[2]

Organization

The FDIC's governing body is the Board of Directors. The board is composed of five members. Three are appointed by the President of the United States with the advice and consent of the United States, one is the Comptroller of the Currency, and one is the director of theConsumer Financial Protection Bureau. The three presidential appointments serve six-year terms. FDIC rules state that no more than three members of the board, in any position, can belong to the same political party. One of the five members is appointed as the chairman of the board by the President with the advice and consent of the Senate. The chairman serves in this capacity for a five-year term.^[3]

To access a current listing of board members and senior executive staff, seethis page.^[4]

The FDIC does not receive public funds. Instead, the FDIC is funded by membership dues paid by member banks. While no federal law mandates participation, most states require banks to be members in the FDIC to be chartered in the state. As of October 2014, the FDIC employed over 7,000 people and insured over 6,000 institutions.^[5]

Authority and responsibilities

The Banking Act of 1933 (also known as the Glass-Steagall Act) granted the FDIC the authority to provide deposit insurance to banks and to regulate and supervise state non-member banks. Initially, the FDIC's coverage was limited to $2,500. However, later legislation periodically expanded this limit. As of January 2017, the limit was $250,000; the limit was established by theDodd-Frank Act. The FDIC does not have the authority to insure credit unions, an authority reserved for theNational Credit Union Administration.^[1]

The FDIC categorizes banks into one of five groups according to their ratio of capital to risk. When this ratio drops below 2 percent, the chartering authority closes the institution and appoints the FDIC as receiver of the bank.^[6]

See also

• Financial Stability Oversight Council
• Consumer Financial Protection Bureau

External links

• Federal Deposit Insurance Corporation

Footnotes

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Dresch (2000) "Confronting the Administrative Threat" by Philip Hamburger and Tony Mills (2017) "Constitutionalism after the New Deal" by Cass R. Sunstein (1987) Federalist No. 23 by Alexander Hamilton (1787) "From Administrative State to Constitutional Government" by Joseph Postell (2012) "Interring the Nondelegation Doctrine" by Eric A. Posner and Adrian Vermeule (2002) "Rulemaking as Legislating" by Kathryn Watts (2015) "The Checks & Balances of the Regulatory State" by Paul R. Verkuil (2016) "The Myth of the Nondelegation Doctrine" by Keith E. Whittington and Jason Iuliano (2017) "The Progressive Origins of the Administrative State: Wilson, Goodnow, and Landis" by Ronald J. Pestritto (2007) "The Rise and Rise of the Administrative State" by Gary Lawson (1994) "The Study of Administration" by Woodrow Wilson (1887) "The Threat to Liberty" by Steven F. Hayward (2017) "Why the Modern Administrative State Is Inconsistent with the Rule of Law" by Richard A. Epstein (2008) Agencies Administrative Conference of the United States •United States Civil Service Commission •U.S. Government Accountability Office •U.S. Office of Information and Regulatory Affairs •U.S. Office of Management and Budget