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Federal Deposit Insurance Corporation (FDIC)

Definition

The FDIC is a United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions. It was created in 1933 during the Great Depression to promote public confidence and stability in the nation's financial system.

Analogy

Think of FDIC as a safety net under a trapeze artist (the bank). If the artist falls (the bank fails), they won't hit the ground (lose all their money) because the safety net (FDIC) is there to catch them.

Related terms

Bank Run: A situation where many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future.

Great Depression: The severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States.

Deposit Insurance: A measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due.