Word: fdic
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...hardly anyone noticed. The Federal Deposit Insurance Corp. paid out $310 million to depositors in the 13 small U.S. banks that closed their doors, and that pretty much was that. The smooth performance illustrated a fact of paramount importance in any discussion of banking troubles: since the FDIC was created in 1934, the calamitous run on a bank has become a dim memory, and the safety of money deposited in banks has been just short of absolute...
...FDIC insures deposits of up to $40,000 a customer in nearly all the nation's banks. It usually does not go into action until a bank either has failed or is precariously close to it. Rather than paying out money itself to depositors, the FDIC will shop around for a solvent bank that can take over the failing one and merely switch names over the doors, sometimes lending money to the takeover bank or indemnifying it against losses. FDIC loans smoothed the 1974 bailouts of New York's Franklin National Bank and San Diego...
...FDIC insures deposits in 14,470 banks in the U.S., including all national banks, but it is not the agency that examines, supervises or presses corrective action on either national banks like Franklin or state-chartered members of the Federal Reserve System. That job belongs to the Comptroller of the Currency (4,700 national banks) and to the Federal Reserve System and state banking departments (1,070 state-chartered "member" banks). FDIC's examination responsibilities are confined to the nation's 8,700 state-chartered banks which are not members of the Federal Reserve System...
...FDIC'S insurance activities, as distinct from its examination responsibilities, are designed to minimize the impact of bank failure on depositors. FDIC performed that function as receiver of Franklin National Bank by arranging the transfer of all Franklin's deposit liabilities, all its offices and about half its assets to European-American Bank & Trust Company...
Faced with the failure of more than 50 federally insured banks in the past decade, the FDIC and other regulatory agencies need to keep a much closer watch not only on the roughly 150 banks on the FDIC'S "problem" list but also on virtually every bank in the nation. That way ailing banks will stand a better chance of being helped long before they reach a Franklin finale...