What does the FDIC do?

The Federal Deposit Insurance Corporation was born during the depths of the Great Depression, a means of shoring up banks when banks were routinely failing and erasing the wealth of Americans. The incoming Trump Administration is looking to pare back — or even eliminate — the FDIC and other financial oversight agencies.

Members of Donald Trump’s presidential transition team want to “dramatically shrink, consolidate or even eliminate the top bank watchdogs,” said The Wall Street Journal. That is part of his new administration’s overall mission to “slash the size of the government and ease oversight.” But any effort to eliminate a bank regulator “would struggle to gain the support of Congress,” said the Journal. The banking industry might also resist, said former FDIC Chair Sheila Bair. “They like the status quo.”

“Though it’s not very common, a bank can fail when it takes on too much risk,” said CNBC. FDIC insurance is designed to keep account holders’ money from being wiped out when a bank goes under, insuring many kinds of deposits — for checking, savings and other kinds of accounts — up to $250,000 for each account holder. That does not only protect Americans with money in the bank; it also protects the banking system, making it less likely customers will “panic and rush” to withdraw money during a financial crisis, said CNBC. (Remember the bank rush scene from “It’s a Wonderful Life?”)

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