Updated March 14, 2023 at 8:05 AM ET
The FDIC was created 90 years ago to help the U.S. navigate a catastrophe that put thousands of banks out of business. Its mission is to keep panic and turbulence from collapsed institutions like Silicon Valley Bank, the second-largest bank failure in U.S. history, from spreading through the financial system.
Now the agency is once again working to convince citizens and businesses that their money is safe, hoping to avert bank runs that would deepen the current banking crisis.
The FDIC is relying on one of its main tools — deposit insurance — to help that cause, announcing that every account will be fully backstopped, even if deposits are above its current $250,000 limit.
The FDIC exists to help the banking system cope with exactly this type of crisis: When it was created in 1933, some 4,000 banks had closed in the first few months alone.
Here’s a look at how the FDIC and deposit insurance work to bolster banks:
Public confidence has always been key
“I can assure you, my friends, that it is safer to keep your money in a reopened bank than it is to keep it under the mattress,” President Franklin D. Roosevelt told the U.S. public on March 12, 1933, in his very first “Fireside Chat.”
Fast-forward 90 years, and the current president and the FDIC are again working to convince citizens and businesses that their money is safe, hoping to avert runs on banks that would deepen the banking crisis.
From the agency’s early days, deposit insurance has been seen as a key to bank customers’ confidence — which in turn has been the key to banks’ solvency.
“We knew how much of banking depended upon make-believe,” Raymond Moley, a speechwriter and adviser to