The Federal Deposit Insurance Corporation is an independent federal agency tasked with insuring customer deposits at US banks and thrifts. Created in 1933, the FDIC seeks to maintain public confidence and stability throughout financial crises by promoting sound banking practices.
During the Great Depression, the public lost confidence in banks in a widespread fashion, causing a “run on the bank.” Customers fled to the bank to withdraw deposits, and as fear spread even more widely, banks became unable to fulfill customer withdrawal requests and ultimately failed. Prior to the creation of the FDIC, there was no guarantee for the safety of deposits under this scenario.
Presently, the FDIC insures deposits up to $250,000 per depositor provided that the depository institution is a member firm.