In theory, can FDIC fail? If it goings default, who is going to cover the customers?

Will the federal reserve automatically prints money to keep FDIC alive? Or such decision must be made through a voting?

  • 3
    you shouldn't cross post. Sep 17, 2022 at 9:24
  • It may be illegal to even ask this question, under the 14th Amendment: “The validity of the public debt of the United States, authorized by law, […] shall not be questioned.” The FDIC’s liabilities are part of the public debt of the US.
    – Mike Scott
    Sep 18, 2022 at 2:26
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    @MikeScott isn't it implied that that means the government is forbidden from considering defaulting, not that it's illegal for a citizen to ask questions about the validity of government debt?
    – Someone
    Sep 18, 2022 at 3:50
  • not directly related, but see money.stackexchange.com/questions/135842/…
    – puzzled
    Sep 18, 2022 at 20:23
  • @MikeScott The constitution restricts the government. It means that the government is not allowed to default on its obligations. For example, the debt ceiling law may be considered unconstitutional due to this provision if because of it the government cannot pay its debts.
    – littleadv
    Sep 18, 2022 at 23:19

3 Answers 3


First of all the FDIC has existed for more than 80 years, it was founded during the great depression, therefore I think they understand what they are doing.

One positive sign was that during the great recession in the 2008 time frame the amount insured went from $100,000 to $250,000, that was done to not panic the bank customers.

Even when a bank goes under, it doesn't mean that the bank is worthless. Many of their loans are still good. Many times the failed bank is merged with another bank.

This is from the FDIC Symbol of Confidence:

FDIC's Deposit Insurance Fund

The FDIC is funded by its member institutions through premiums and assessments paid on deposits. And, if ever needed, the FDIC can draw on a line of credit with the U.S. Treasury.

Full Faith and Credit of U.S. Government

FDIC deposit insurance is backed by the full faith and credit of the United States government. This means that the resources of the United States government stand behind FDIC-insured depositors.

The current balance in the insurance fund is strong: This is from a September 2022 press release

The Reserve Ratio for the Deposit Insurance Fund Rose to 1.26 Percent: The Deposit Insurance Fund (DIF) balance was $124.5 billion on June 30, up $1.4 billion from the end of the first quarter. The reserve ratio rose three basis points to 1.26 percent, as insured deposits fell 0.7 percent.

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    (Slightly) tongue in cheek... at which bank is that ~$125 billion fund held, and what happens if that bank goes tits-up? Does the FDIC disappear in a puff of circular logic :-)
    – TripeHound
    Sep 17, 2022 at 14:14
  • @TripeHound the backing of the US government will solve that problem. And the fund is not deposited in one single institution, so it would need a whole lot more than that bank to go tits-up for the FDIC fund to become itself insolvent.
    – littleadv
    Sep 17, 2022 at 18:32
  • This is not an answer I afraid. You claim that FDIC is unlikely to fail in reality (which is a common sense). The question is about the theoretical possibility of FDIC failure and what would be the consequence of a hypothetical failure.
    – dodo
    Sep 18, 2022 at 15:14
  • 1
    @dodo And, if ever needed, the FDIC can draw on a line of credit with the U.S. Treasury. Full Faith and Credit of U.S. Government - it's right there. Highlighted it for you.
    – littleadv
    Sep 18, 2022 at 19:26
  • @littleadv Are you sure that, in case of default, FDIC will for sure automatically draw on a line of credit with the US Treasury without a board voting?
    – dodo
    Sep 19, 2022 at 5:42

The FSLIC was a quasi-governmental agency that provided insurance for deposits at savings and loan banks and it went bankrupt during the 1980s banking crisis.

The cash that the FDIC has only covers a fraction of the assets that it covers. It too could become insolvent. It was on the way to insolvency during the 2008 GFC.

However, the US government backstops the FDIC so although it could become insolvent, the taxpayer will always bail them out.

  • The last part (the US government backing) was added specifically to address the problem that occurred with FSLIC, it was codified in 1989 (the FDIC itself was established in 1930s)
    – littleadv
    Sep 18, 2022 at 21:34

Short answer is yes, FDIC can fail and go bankrupt similar to SIPC.

  • No, this is incorrect. See 12 USC 1825(d). The "full faith and credit of the US government" is part of the Federal law establishing the FDIC (The Federal Deposit Insurance Act).
    – littleadv
    Sep 18, 2022 at 21:31

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