FDIC
The Federal Deposit Insurance Corporation (FDIC) is an independent U.S. government agency that insures deposits at member banks and savings institutions up to $250,000 per depositor, per institution, per ownership category.
Created by the Banking Act of 1933 — passed in the immediate aftermath of the Great Depression bank runs that wiped out millions of Americans' savings — the FDIC was designed to prevent the kind of bank-run panic that can make even healthy banks insolvent. By guaranteeing depositors that their money is safe regardless of a bank's fate, the FDIC removes the incentive to withdraw funds at the first sign of trouble, thereby breaking the self-fulfilling prophecy of bank runs.
The FDIC is funded not by taxpayers but by insurance premiums paid by member banks, which are assessed based on their deposit levels and risk profiles. As of 2024, the FDIC insures deposits at more than 4,500 institutions holding roughly $20 trillion in domestic deposits. The standard insurance limit is $250,000 per depositor, per FDIC-insured bank, per account ownership category — meaning a married couple can have significantly more than $250,000 insured at a single bank by structuring accounts correctly (individual, joint, retirement, etc.).
When a member bank fails, the FDIC acts as receiver. It typically arranges a purchase-and-assumption transaction in which a healthy bank acquires the failed bank's deposits and assets over a weekend, so customers see no interruption of service. If no buyer is found, the FDIC pays depositors directly. Since the FDIC's founding, no insured depositor has ever lost a single penny of insured deposits.
The 2008 financial crisis tested the FDIC severely. It oversaw the failure of Washington Mutual — the largest bank failure in U.S. history at $307 billion in assets — and handled 465 total bank failures between 2008 and 2012. More recently, the March 2023 failures of Silicon Valley Bank and Signature Bank, and the subsequent acquisition of First Republic by JPMorgan Chase, spotlighted the limits of the $250,000 cap, as many corporate depositors held balances far in excess of that amount. The FDIC invoked a systemic risk exception to guarantee all deposits at SVB and Signature, sparking fresh debate about whether the cap should be raised for business accounts.
For retail investors and savers, understanding FDIC coverage is a fundamental part of cash management. Brokerage cash sweep accounts, for example, may or may not be FDIC-insured depending on where the cash is held, making it essential to read the fine print.