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Federal Deposit Insurance
Corporation Before 1933, and particularly during the period 1929—1933, bank failures were not uncommon. {{U}}(51) {{/U}} a bank overextended itself in creating credit or if several of its important loans could not be {{U}}(52) {{/U}}, depositors in the bank would frequently become panicky and begin to make large withdrawals. {{U}}(53) {{/U}} the bank had only a small number of its deposits backed by currency, the bank would soon be unable to meet withdrawals, and most depositors {{U}}(54) {{/U}} their money. Most frequently a bank merely needed time to improve its cash position by (55) some of its loans and not making additional ones. In 1933, the number of bank failures {{U}}(56) {{/U}} a peak, forcing the federal government to intervene and {{U}}(57) {{/U}} the banks temporarily. To help restore the public's confidence {{U}}(58) {{/U}} banks and strengthen the banking community, Congress passed legislation setting up the Federal Deposit Insurance Corporation. {{U}}(59) {{/U}} corporation, an agency of the federal government, now insures over 90 percent of all mutual savings and commercial bank deposits for {{U}}(60) {{/U}} $100,000 per deposit. The FDIC has {{U}}(61) {{/U}} its insurance found by charging member institutions one-twelfth of 1 percent of their total deposits. As a result of the protection provided by the FDIC and through other kinds of supervision, bank failures have been {{U}}(62) {{/U}} to a few isolated instances. When deposits are federally insured, people {{U}}(63) {{/U}} rush to withdraw their money if they {{U}}(64) {{/U}} the financial condition of their bank. The delay gives the banks the necessary time to adjust their cash credit balance, and this action helps to reduce the {{U}}(65) {{/U}} of bankruptcy. |