FDIC And The Savings And Loan Crisis

7 Pages 1779 Words

ll the banks associated will want to remove their funds at the same time for fear of the bank not being able to pay the creditors what it owes. This is probably true in today’s fractional reserve system. The fractional reserve system allows for banks to not have to hold 100 percent of the depositor’s funds as reserves. According to the above article, this situation is quite common around the world where depository institutions hold funds that are not insured by any outside firm. It seems logical that given this situation, a greater amount of people will maintain that ‘inherent distrust” mentioned in the article.

The Federal Deposit Insurance with the later addition of the FSLIC, NCUSIF, and SAIF were created to provide a federally funded insurance for funds deposited in national depository institutions. This Corporation originally charged insurance premiums to banks and other institutions based on its total deposits. These premiums went into funds that would be used to reimburse customers in the even of bank failures. This system allows consumers to be better able to trust that their funds will be safe in financial institutions. The FDIC will insure up to a maximum of $100,000 in funds within a given bank.

In the early eighties, the United States went through the most serious banking crisis since the great ...