Deposit Insurance Fund (DIF)

Categories: Insurance, Banking

One of the more significant lessons learned from The Great Depression revolved around the need for restored confidence in the banking system, which crashed along with the stock market when there was a run on the banks for depositors’ withdrawals. Fear won. Greed lost.

Created as a part of the Glass-Steagall Act in 1933, the Federal Deposit Insurance Corp. (FDIC) guarantees all savings accounts up to $250,000. In order to fund the FDIC, all banks operating in the US contribute their respective insurance premiums in the the Deposit Insurance Fund (DIF), which is administered by the FDIC board.

Now you know at least one reason bank managers tell their staffs to just cooperate with bank robbers.

Related or Semi-related Video

Finance: What is the FDIC?6 Views

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Finance allah shmoop What is the f d i C

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the dick that's How you pronounce it there in the

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wall street art federal deposit insurance corporation That's what it

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is but what is it Well it's insurance bank insurance

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Can you think of anything more boring That is when

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you deposit eleven thousand three hundred forty two dollars of

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wedding cash that was stuffed in your spouses Undergarments from

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the you know the money dance into your bank of

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america account Well you don't have to worry that it'll

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ever just disappear So why is that even a thing

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like why do you even have to worry about money

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disappearing in a bank Well in the great depression which

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was way more severe than the pretty good depression that

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happened twenty years earlier late nineteen twenties early nineteen thirties

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while banks did in fact collapse there was panic The

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population raced to the banks to withdraw all of their

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cash Teo you know stick under their mattresses And since

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banks on lee carried on hand maybe a few percent

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five maybe ten percent of their total deposits like all

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the rest was invested in stocks or loaned in home

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Mortgages or for the brand new hot off the line

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butter churn or three thousand they didn't have the money

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The bank simply didn't have the cash when it was

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demanded by customer depositors and well bad things happen when

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they turned their pockets inside out It was panic and

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about a third of all banks simply failed the population

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for a brief moment in time lost trust in the

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american banking system and had to really really really bad

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like imagine trying to get a mortgage in somalia today

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Like would you trust a somalian bank Tough room So

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the government created the dick fbi see as a kind

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of insurance company guaranteeing that bank defaults won't happen again

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So the initial insurance limit was set at twenty five

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hundred bucks per ownership category like one deposit or but

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remember that nineteen thirty three twenty five hundred bucks could

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buy you like a house So that was a lot

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of money back then A variety of laws were passed

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in the near century since then and today the fbi

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see insures up to two hundred fifty thousand dollars per

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ownership category Well with that limited place banks are more

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Or less insured against anything disastrous befalling them although you

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know if a bank fails uncle sam can just come

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on in and bail him out Yeah it's good to 00:02:24.745 --> [endTime] be a bank Thank you very much

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