The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, currently up to $250,000 per depositor per bank. The vast number of bank failures in the Great Depression spurred the United States Congress to create an institution to guarantee deposits held by commercial banks, inspired by the Commonwealth of Massachusetts and its Depositors Insurance Fund (DIF).

The FDIC insures accounts at different banks separately. For example, a person with accounts at two separate banks (not merely branches of the same bank) can keep $250,000 in each account and be insured for the total of $500,000. Also, accounts in different ownerships (such as beneficial ownership, trusts, and joint accounts) are considered separately for the $250,000 insurance limit. The Federal Deposit Insurance Reform Act of 2005 raised the amount of insurance for an Individual Retirement Account to $250,000.

Inception

The 19th century economy of the United States was characterized by occasional bank panics, with corresponding economic downturns and unemployment. After the particularly severe Panic of 1893, legislators sought to arrange better security for bank deposits. William Jennings Bryan, for example, proposed a national bank guarantee fund for use during bank runs. Although deposit security measures were adopted over time at the state level, the federal government chose a "lender of last resort" approach in the 1913 foundation of the Federal Reserve System.

This combined state-federal system failed to prevent a bank panic in 1933, at the end of Herbert Hoover's term as president. The panic saw 4,004 banks closed, with an average of $900,000 in deposits. Under the federal government's supervision, these banks were merged into stronger banks. Many months later, depositors received compensation for roughly 85% of their former deposits.Fact: date=November 2007 Incoming President Franklin D. Roosevelt, a former banker himself, did not like the insurance approach, but he agreed to it to restore confidence in the banking system.Fact: date=July 2008

In May 1933, the U.S. House Banking and Currency Committee submitted a bill that would insure deposits 100 percent to $10,000, and after that on a sliding scale; it would be financed by a small assessment on the banks. However the U.S. Senate Banking Committee reported a bill that excluded banks that were not members of the Federal Reserve System. Senator Arthur Vandenberg rejected both bills because neither contained a ceiling on the guarantees. He proposed an amendment covering all banks, beginning by using a temporary fund and a $2,500 ceiling. It was passed as the Glass-Steagall Deposit Insurance Act in June 1933 with Steagall's amendment that the program would be managed by the new Federal Deposit Insurance Corporation. The act established the FDIC as a temporary government corporation and gave the FDIC the authority to regulate and supervise state non-member banks; it extended federal oversight to all commercial banks for the first time, and prohibited banks from paying interest on checking accounts. The act funded the FDIC with $289 million in initial loans from the United States Treasury and the Federal Reserve, loans which the FDIC repaid in 1948.