ShmoopTube

00:00

Finance allah shmoop What is the f d i C

00:06

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

00:09

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

00:15

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

00:20

Can you think of anything more boring That is when

00:22

you deposit eleven thousand three hundred forty two dollars of

00:25

wedding cash that was stuffed in your spouses Undergarments from

00:29

the you know the money dance into your bank of

00:31

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

00:34

ever just disappear So why is that even a thing

00:38

like why do you even have to worry about money

00:40

disappearing in a bank Well in the great depression which

00:44

was way more severe than the pretty good depression that

00:46

happened twenty years earlier late nineteen twenties early nineteen thirties

00:50

while banks did in fact collapse there was panic The

00:53

population raced to the banks to withdraw all of their

00:57

cash Teo you know stick under their mattresses And since

01:00

banks on lee carried on hand maybe a few percent

01:04

five maybe ten percent of their total deposits like all

01:07

the rest was invested in stocks or loaned in home

01:10

Mortgages or for the brand new hot off the line

01:12

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

01:15

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

01:18

demanded by customer depositors and well bad things happen when

01:22

they turned their pockets inside out It was panic and

01:26

about a third of all banks simply failed the population

01:29

for a brief moment in time lost trust in the

01:32

american banking system and had to really really really bad

01:36

like imagine trying to get a mortgage in somalia today

01:39

Like would you trust a somalian bank Tough room So

01:42

the government created the dick fbi see as a kind

01:46

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

01:50

So the initial insurance limit was set at twenty five

01:53

hundred bucks per ownership category like one deposit or but

01:56

remember that nineteen thirty three twenty five hundred bucks could

01:59

buy you like a house So that was a lot

02:02

of money back then A variety of laws were passed

02:05

in the near century since then and today the fbi

02:07

see insures up to two hundred fifty thousand dollars per

02:10

ownership category Well with that limited place banks are more

02:14

Or less insured against anything disastrous befalling them although you

02:18

know if a bank fails uncle sam can just come

02:21

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

Full Transcript