Bank Regulations – FDIC Part II

A Rocky Start

Between 1933 and 1983, banks increased their loans significantly and had a lower rate of increasing loan losses. Consequently, bank assets saw significant growth. In 1947, the lending percentage surged from 16% to 25% of industry assets. In the 1950s, the rate continued to increase and reached 40%. By the early 1960s, it had soared to 50%.  

However, the FDIC faced criticism from the American Bankers Association (ABA) as being too costly and an unnatural way to support bad business activity. Nonetheless, the FDIC proved its effectiveness as only nine more banks closed in 1934.

Because banks were extremely cautious and bank regulators were extremely strict during World War II and the years that followed, some people believed that deposit insurance wasn’t as important. These financial experts came to the conclusion that the system had become too cautious, which was stopping the free market economy from working as well as it could. The system carried on regardless.

fdic timeline from 1933 to 1980

The following significant occasions and landmarks happened between the FDIC’s founding and 1983:

  • 1933: Congress creates the FDIC.
  • 1934: Deposit insurance coverage is initially set at $2,500, and raised midyear to $5,000.
  • 1950: Deposit insurance increased to $10,000. Refunds are established for banks to receive credit for excess assessments above operating and insurance losses.
  • 1960: FDIC’s insurance fund passes $2 billion.
  • 1966: Deposit insurance is increased to $15,000.00.
  • 1969: Deposit insurance is increased to $20,000.00.
  • 1974: Deposit insurance is increased to $40,000.00.
  • 1980: Deposit insurance is increased to $100,000.00. The FDIC insurance fund is $11 billion.

Banking practices started to change in the 1960s. As branching laws became less strict, banks started to take risks they normally wouldn’t and open new branches in new places. During the 1970s, this growth was good for the banking industry because solid economic growth made it possible for even risky borrowers to pay their bills. During the 1970s, the economy grew steadily, which helped the banking sector. This made it possible for even risky borrowers to meet their financial obligations. However, the banking sector adopted this style, which led to the 1980s demand for deposit insurance.

On June 16, 1933, President Franklin Roosevelt signed the Banking Act of 1933, a part of which established the FDIC, as a result of the stock market crash and Great Depression. This system provided insurance for each bank and their deposit accounts. At Roosevelt's immediate right and left were Sen. Carter Glass of Virginia and Rep. Henry Steagall of Alabama, the two most prominent figures in the bill's development.
On June 16, 1933, President Franklin Roosevelt signed the Banking Act of 1933, a part of which established the FDIC. At Roosevelt's immediate right and left were Sen. Carter Glass of Virginia and Rep. Henry Steagall of Alabama, the two most prominent figures in the bill's development.

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