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What is the FDIC? Have you ever thought about what a bank does with your money? Do you know what a bank account is? What about a checking or savings account? Look below for the answers!
The Federal Deposit Insurance Corporation, or FDIC for short, is a part of the federal government. That means it has the ability to make rules that affect banks in all 50 states, District of Columbia, Virgin Islands, Guam, and Puerto Rico. If it was part of a state government, it could only make rules that affected banks in that state alone. The FDIC's biggest job is insuring the savings of millions of Americans in all the FDIC insured banks across the country, even the savings of kids. The FDIC also visits banks on a regular basis to make sure they are following the rules they need to. These rules, called regulations, make sure the bank operates profitably and fairly. For example, one rule banks have to follow is called the Equal Credit Opportunity Act. It says that a bank can't refuse to loan money to someone just because of his or her color, religion, national origin or for a number of other reasons. A bank CAN refuse to loan money to someone if it thinks (by looking at how much someone earns and how they've paid off other bills) the person will not repay the loan.
When a bank has a sign on it that says "Insured by FDIC" it means that if the bank doesn't have enough money to pay back the people it owes money to, including the bank's depositors, and is closed, the FDIC will make sure all of the depositors get their money, up to the insurance limit which is $250,000. To be insured by the FDIC, a bank must prove it is being run profitably and fairly.
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