Which entity is responsible for protecting deposits made in banks?

Which entity is responsible for protecting deposits made in banks?

• A. Federal Reserve
• B. Securities and Exchange Commission (SEC)
• C. Federal Deposit Insurance Corporation (FDIC)
• D. Consumer Financial Protection Bureau (CFPB)

Answer: (C)

The Federal Deposit Insurance Corporation (FDIC) is the entity responsible for protecting deposits made in banks. Founded in 1933 in response to widespread bank failures, the FDIC's primary role is to maintain public confidence in the U.S. financial system by insuring deposits. When a bank fails, the FDIC insurance ensures that depositors are reimbursed up to a certain limit, which currently is $250,000 per depositor, per insured bank, for each account ownership category. This protection helps to stabilize the banking system by preventing bank runs, where frightened depositors withdraw their funds en masse, potentially leading to further bank failures. The FDIC also actively monitors the health of banks and institutions, contributing to overall financial stability. In contrast, the Federal Reserve primarily focuses on regulating monetary policy and supervising banks to ensure systemic stability, while the Securities and Exchange Commission (SEC) oversees securities markets and protects investors in securities transactions. The Consumer Financial Protection Bureau (CFPB) is dedicated to consumer financial protection, focusing on ensuring fairness and transparency in financial products and services but does not insure bank deposits.

The Federal Deposit Insurance Corporation (FDIC) is the entity responsible for protecting deposits made in banks. Founded in 1933 in response to widespread bank failures, the FDIC's primary role is to maintain public confidence in the U.S. financial system by insuring deposits. When a bank fails, the FDIC insurance ensures that depositors are reimbursed up to a certain limit, which currently is $250,000 per depositor, per insured bank, for each account ownership category.

This protection helps to stabilize the banking system by preventing bank runs, where frightened depositors withdraw their funds en masse, potentially leading to further bank failures. The FDIC also actively monitors the health of banks and institutions, contributing to overall financial stability.

In contrast, the Federal Reserve primarily focuses on regulating monetary policy and supervising banks to ensure systemic stability, while the Securities and Exchange Commission (SEC) oversees securities markets and protects investors in securities transactions. The Consumer Financial Protection Bureau (CFPB) is dedicated to consumer financial protection, focusing on ensuring fairness and transparency in financial products and services but does not insure bank deposits.