By BankingMyWay Staff
The Federal Deposit Insurance Corporation, commonly known as the FDIC, is an independent government agency that insures a limited amount of money deposited into bank accounts. In October of 2008, the FDIC temporarily increased the amount of insured deposits from $100,000 per account to $250,000 per account to inspire confidence in banks during a time of dramatic economic slowdown.

This is not the first time the FDIC has changed insurance coverage limits, and history shows an interesting trend in bank insurance that is directly affected by world events and economic fluctuations.

1933 - The FDIC was created in response to the thousands of bank failures during The Great Depression. Prior to this time, accountholders had no way to recover their losses when banks failed.

January 1, 1934 - Deposit insurance took affect for all account holders at FDIC-insured banking institutions. Deposits were insured up to $2,500 per account.

July 1, 1934 – Deposit insurance was temporarily increased to $5,000 per account after initial review of the first six months of the FDIC. It was unclear at this point if this limit would remain at this level.

1935 – The Banking Act of 1935 raises FDIC insurance to $5,000 per account permanently in response to public need. Even though The Great Depression was technically over, hundreds of banks continued to fail annually until the late 1930s.

1950 – The Federal Deposit Insurance Act of 1950 increased the FDIC insurance limit from $5,000 to $10,000. This move was in response to economic stimulus spurred by the military-industrial boom as a result of the Cold War, the space program and the Korean War.

1966 – The war in Vietnam, despite protests and demonstrations, pushes forward and helps to build up the American economy. FDIC insurance is raised again to $15,000 per account.

1969 – The FDIC raises insurance to $20,000 per account due to the growth of Wall Street and more women entering the work force. ATMs were installed in New York and the first plastic strip cards were distributed, which made access to money easier.

1974 – Nixon’s “New Economic Policy” attempts to control inflation have backfired and food and gas prices skyrocket. Due to the astronomical inflation levels, the FDIC raises the insurance limit to $40,000.

1980 – Amidst the Savings and Loan disaster of the 1980s, the FDIC raises the limit again to $100,000 per account with the Depository Institutions Deregulation and Monetary Control Act of 1980. This limit remains consistent into the economically prosperous 1990s.

October 3, 2008 – The FDIC temporarily increased insurance coverage from $100,000 per account to $250,000 per account in response to failures of large banks and financial institutions such as Lehman Brothers, IndyMac and Washington Mutual. This is set to expire on December 31, 2009.

As of March 2009, the FDIC insures some 5,160 financial institutions. According to the FDIC, there have been no funds lost from any of the thousands of bank failures in the agency’s 75-plus year history.

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