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What is the FDIC and what does it insure?


The FDIC is the Federal Deposit Insurance Corporation, a U.S. government agency that insures bank deposits up to $250,000 per depositor per bank. That means that if you’re rolling in dough, you can put up to that amount into an account at each of several banks. If one or all of them were to go belly up, you would get all of your money back. The FDIC insures checking, savings and bank money-market accounts, as well as certificates of deposit. What it does not insure are mutual funds and other investment assets or money-market funds run by non-bank institutions.
The FDIC is part of the alphabet soup of federal agencies created during the Great Depression. It was established in a bill passed in 1933. The goal was to put an end to the bank runs that had added to the instability of the banking system during that time of economic, financial and social upheaval. The limit on deposits insured rose steadily from $2,500 when the FDIC started operating to $100,000 in 1980. It remained there until 2008, during the latest threat to the financial system, when it was raised to its current level.
Should a bank that is an FDIC member, as almost all of them are, fail, there typically isn’t anything that depositors need to do to claim their money. What almost always happens is that the deposits are turned over to a solvent bank that the depositors then become customers of. They may have to start doing business at a different branch, and they are free to take their money elsewhere, of course, but there is seldom any disruption in their ability to get their hands on their cash.
-Conrad de Aenlle