How Safe are Your Deposits?

Abstract

This paper discusses the resources available to the Federal Deposit Insurance Corporation to pay insured depositor claims. It shows that the FDIC’s resources are limited. Although the FDIC asserts that insured deposits are backed by the full faith and credit of the United States, there is no statutory provision to this effect and no means for the FDIC to exercise the full faith and credit of the United States if the FDIC runs out of funds. An act of Congress likely would be required in the event the FDIC insurance fund exhausts its capacity to pay insured depositors in the event of a major bank failure.

Keywords: deposit insurance, FDIC, Dodd-Frank Act, Federal Deposit Insurance Corporation, full faith and credit of the United States