Federal Deposit Insurance Corporation, Washington DC

The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government that protects you against the loss of your deposits if an FDIC-insured bank or savings association fails. FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC’s creation in 1933, no depositor has ever lost even one penny of FDIC-insured funds.

FDIC insurance covers all deposit accounts at insured banks and savings associations, including checking, NOW, and savings accounts, money market deposit accounts and certificates of deposit (CDs) up to the insurance limit.

Congress created the FDIC in the Banking Act of 1933 to maintain stability and public confidence in the nation’s banking system. The statute provided a Federal government guarantee of deposits in U.S. depository institutions so that depositors’ funds, within certain limits, would be safe and available to them in the event of a financial institution failure. In addition to its role as insurer, the FDIC is the primary federal regulator of Federally-insured state-chartered banks that are not members of the Federal Reserve System. The FDIC carries out its mission through three major programs: insurance, supervision, and receivership management.

The Insurance Program encompasses the activities undertaken by the Corporation to administer the Deposit Insurance Fund (DIF), which is funded through assessments on insured institutions as well as investment income, and to provide depositors with access to their insured funds when an insured institution fails.

The Supervision Program encompasses the activities undertaken by the Corporation to promote safe and sound operations and compliance with fair lending, consumer protection, and other applicable statutes and regulations by insured institutions for which the FDIC is the primary Federal regulator (in cooperation with state banking agencies). The FDIC also has back-up supervisory responsibility for other insured institutions for which the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS) are the primary Federal regulators.

The FDIC is a recognized leader in promoting sound public policies, addressing risks in the nation’s financial system, and carrying out its insurance, supervisory, consumer protection, and receivership management responsibilities.

The performance of the economy at national and regional levels directly affects the business strategies of individual financial institutions and may affect the industry’s overall performance. Lending and funding strategies of insured depository institutions are influenced by interest rates, inflation, unemployment, and changes in the business cycle for sectors such as agriculture, mortgage lending, commercial real estate, and energy.

Since mid-2007, a deep and prolonged housing market downturn in many areas of the U.S. has coincided with significant disruptions to credit markets to create a much more challenging operating environment for FDIC-insured institutions. The industry has experienced sharply higher credit losses in mortgage and construction lending and large write downs in other mortgage related assets. Institutions that were highly dependent on market-based sources of funding have had to adjust their business models. The historic scale and scope of these credit market disruptions implies that their effects will continue to be felt for some time to come.

In this more restrictive credit environment, U.S. economic activity slowed markedly in late 2007 and early 2008. Residential construction continued to weaken as nonprime mortgage credit became less available, and growth in consumer and business spending also slowed. Economic activity in the industrial Midwest continued to lag the nation, while regional economies in and around Florida and California showed significant adverse effects from the housing market distress. The U.S. economy as a whole lost payroll jobs in each of the first six months of 2008, and inflationary pressures rose as oil prices spiked to record highs. This poor U.S. economic performance has led policymakers to implement both monetary and fiscal stimulus measures that have helped prevent real economic activity from shrinking outright.

These market disruptions could, in the ...longer term, work to the advantage of banks’ ability to access deposits since they are heavily regulated compared to non-bank service providers. However, it appears unlikely that the record industry earnings of recent years will soon be matched, and higher levels of both problem institutions and failed institutions can be expected. These uncertainties will ultimately be resolved over time with the recognition of losses, an improvement in credit practices, and the re-pricing of risk in the financial markets. In the meantime, there remains a potential for additional financial market disruptions which could result in further adverse consequences for FDIC-insured institutions. This situation highlights the need for both the Corporation and other regulators to identify and manage the risks posed by new and existing financial products.

The FDIC employs about 5,000 people. It is headquartered in Washington, D.C., but conducts much of its business in six regional offices and in field offices around the country. With an insurance fund totaling more than $45 billion, the FDIC insures more than $5 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.