The FDIC and the Financial Crisis Term Paper by Nicky

An overview of the Federal Deposit Insurance Corporation (FDIC)'s response to the recent financial crisis.
# 150996 | 1,187 words | 6 sources | APA | 2012 | US
Published on May 17, 2012 in Political Science (Government Agencies) , Economics (National)

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The paper identifies and discusses the roles of the Federal Deposit Insurance Corporation (FDIC) in maintaining the nation's financial system. The paper looks at how the agency has been forced to deal with well over 100 bank liquidations since the beginning of 2008 and discusses how it has successfully maintained stability and public confidence in the financial system. The paper does point out, however, that the spate of bank failures has put tremendous strain on the organization and a tremendous risk to the American taxpayer. The paper recommends that the FDIC find ways to reduce this risk and curtail excessive risk-taking and spending.

From the Paper:

"The first step the FDIC has taken is to maintain its deposit guarantees. The agency traditionally guarantees deposits up to $250,000 at banks. During this crisis, the FDIC has increased this guarantee to include all funds held in qualifying non-interest bearing accounts through June 30, 2010 under its Transaction Account Guarantee (TAG) program (Dropkin, 2009). This program essentially extends protection of accounts beyond the $250,000 threshold for the foreseeable duration of the crisis, enhancing public confidence in the financial system. Maintaining this guarantee has been costly and the agency's insurance fund has now run into the red. To deal with this cash crunch, the agency has asked banks to pay their fees through 2012 by the end of 2009 (Grey, 2009). That the FDIC is willing to take such a bold step is indicative of the agency's commitment to the maintenance of the financial system.
"Another step the FDIC has taken, while handling the liquidation of banks, is that it is encouraging the buyers of those assets to offer unemployed homeowners temporary mortgage forbearance (Dropkin, 2009). This has two key impacts. The first is that it encourages the rapid liquidation of failed banks by defraying some of the risk, as the FDIC shares some of the risk through a loss-share agreement with the purchaser. The second key impact is that it protects unemployed homeowners in the event that their bank becomes insolvent."

Sample of Sources Used:

  • FDIC website. Various pages. Retrieved October 19, 2009 from
  • Wutkowski, K. & Rascoe, A. (2009). US bank failure tally hits 99 for 2009. Yahoo News. Retrieved October 19, 2009 from
  • Grey, Barry. (2009). Wall Street lauds FDIC plan to replenish bank deposit insurance fund. World Socialist Website. Retrieved October 19, 2009 from
  • Dropkin, C. (2009). Economic Crisis Response Group Newsletter, September 14, 2009. Economic Crisis Response Group. Retrieved October 19, 2009 from
  • Paletta, D. (2009). Raft of deals for failed banks puts US on hook for billions. Wall Street Journal. Retrieved October 19, 2009 from

Cite this Term Paper:

APA Format

The FDIC and the Financial Crisis (2012, May 17) Retrieved May 27, 2023, from

MLA Format

"The FDIC and the Financial Crisis" 17 May 2012. Web. 27 May. 2023. <>