Routledge Dictionary of Economics, Second Edition
Insurance used to protect deposits held in banks and other financial institutions.
In the USA, the major scheme has been the FEDERAL DEPOSIT INSURANCE CORPORATION which from 1933 insured the deposits of the member banks of the FEDERAL RESERVE SYSTEM and of non-member banks choosing to join. Instability in the banking system of the USA in the 1990s put deposit insurance under a great strain. Critics argued that insurance made banks more reckless in their lending policies, causing the financial difficulties which insurance sought to avoid.
See also: Banking Act 1979; Resolution Trust Corporation
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