The New Deal and Recovery, Part 27: Deposit Insurance

ConclusionPart 27: Deposit Insurance_____________________[1] To this list we might add a fourth item, noted by Golembe in a subsequentinterview, to wit: that the deposit " insurance " provided for by the 1933 Banking Act wasn ' t really insurance at all. Unlike genuine insurance policies, it covers depositors for losses regardless of whether the losses were due to recklessness on their or their banks ' part. And unlike genuine insurance funds, the FDIC ' s insurance " fund " is an accounting fiction, the truth being that the " premiums " it collects from banks go into the federal government ' s general coffers. " The government ' s guarantee of deposit, " Golembe explains, " was given the name ' insurance ' because that sounded much less radical than ' guarantee. ' … [M]any of the bold initiatives of the New Deal were characterized originally as ' insurance ' in order to make them more acceptable, such as: ' flood insurance, ' ' old age insurance ' or ' crop insurance. ' The problem with calling it ' deposit insurance ' which it clearly is not, is that some bankers and most academics began to believe it! " For a humorous take on the FDIC ' s insurance fund, by one of its former chairs, gohere and scroll down a bit.[2] The 1933 Act did away with double liability for national bank shares issued after its passage, but left it in place for outstanding ones. The 1935 Banking Act allowed any bank to exempt all its shareholders from double liability six months after it publicly an...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs