6

Issues in my head raised by the quesion about withdrawing money from a bank before it goes under

If the purpose of the FDIC in the United States system is to insure deposits, how is the money the FDIC has collected? Is there an international entity with a similar mission? Are there country specific agencies with a similar mission? Most importantly, are there any examples of a similar system that has failed?

  • 1
    You're going down a very dangerous path. Pretty soon you'll be stacking nickels and Jack Daniel's in your basement. :) "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." Henry Ford. "Suspicion toward a currency, once awakened, develops insomnia." James Dines. – Muro Aug 24 '10 at 18:44
8

how is the money the FDIC has collected

Fees collected from the banks:

The FDIC receives no Congressional appropriations – it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities.

http://www.fdic.gov/about/learn/symbol/index.html

They also use the proceeds from liquidating the assets of failed banks to make payouts.

Are there country specific agencies with a similar mission?

Canada Deposit Insurance Corporation
Instituto para la Ptotección al Ahorro Bancario (Mexico)
Financial Services Compensation Scheme (UK) not quite like the FDIC

You'll have to search for others yourself. :)

Most importantly, are there any examples of a similar system that has failed?

As the Mythbusters say, "failure is always an option."

There is a statement on FDIC's website to the effect that they are backed by the "full faith and credit" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary.

This 2008 article regarding a propsed revamp of the UK's FSCS should be of general interest to you on this topic, though it does not answer the question of failed systems. (Well, as far as I know. I have only skimmed the article.)

  • If FDIC backed by the Treasury? i.e. wouldn't the US govt have to fail in order for the FDIC to fail (since the Treasury could just print more money)... – Michael Pryor Aug 24 '10 at 14:00
  • @michael One of my favorite lines from The Simpsons is appropriate for this one: "short answer yes with an if, long answer no with a but..." Technically speaking, no. There is a statement on their website to the effect that the FDIC is backed by the "full faith and credit" of the U.S. government. That said, the FDIC maintains its own fund to make insurance payouts. Granted, in the shakiness of the 2008-2009 financial crisis they did start waving a red flag about their realistic ability to cover their obligation. Practically speaking, the government will likely step in if necessary. – George Marian Aug 24 '10 at 17:47
  • So, if the FDIC feels uncomfortable with their reserve, they charge more to banks who will likely turn around and charge me more. – MrChrister Aug 24 '10 at 19:25
  • @MrChrister Yup, pretty much. They also liquidate the assets of failed banks and use those proceeds for the payouts. – George Marian Aug 24 '10 at 19:32
  • In the US a sibling agency of the FDIC, the Federal Savings & Loan Insurance Corp did fail in the late-80s/early-90s 'savings & loan crisis'. – dave_thompson_085 May 20 '16 at 18:29

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .