FDIC History And Extraordinary Powers
In FDIC Takeover: How It Affects Your Construction Project we started talking about the Federal Deposit Insurance Corporation (the "FDIC") and how they take over a failed bank. Today we're going to talk about the history and background of the FDIC. And that will lead us into talking about the FDIC's extraordinary powers.
The Great Depression and Creation of the FDIC
Confidence in banks was at an all time low. Panicked depositors withdrew money so fast that on the day after he was inaugurated, President Franklin Roosevelt declared a banking holiday - all U.S. banks shut down for the next 4 days while federal officials examined their financial condition. 
In the wake of the 1929 stock market crash the Great Depression was so bad that by March 1933 more than 9,000 U.S. banks failed. The entire U.S. financial system was on the verge of melting down. President Hoover and other government officials even feared that general anarchy could soon follow.
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The holiday stabilized the banking system and the crisis subsided. After the holiday most banks re-opened and there were no more crises like 1933 again. Part of the reason was new laws passed in the wake of the crisis that included setting-up the FDIC to insure bank deposits.
Bank deposit insurance programs in the U.S. go back as early as a New York state program that started in 1829. Between 1866 and 1933, Congressmen has introduced 150 bills for bank deposit insurance in one form or another. But it took the panic of 1933 to finally get deposit insurance enacted into law as part of the Banking Act of 1933, also known as the Glass-Steagall Act after its co-sponsors, Virginia Senator Carter Glass and Alabama Representative Henry Steagall.
The Banking Act of 1933 set-up the FDIC and laid the groundwork for its powers and its initial funding. Starting in 1933, and continuing today, the FDIC: For more on the early history of the FDIC, try The First Fifty Years: A History of the FDIC 1933-1983 prepared and published by the FDIC staff. Extraordinary Powers When the FDIC resolves a bank that loans money to someone involved in a construction project, chances are they'll use some of these extraordinary powers. And that usually has a dramatic effect on the project and everyone involved in it. In The Next Bank Failure Post
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Congress has given the FDIC extraordinary powers to help them do the things mentioned above. The extraordinary powers that really affect the construction industry are the FDIC's powers to:
In the next post on bank failures, we'll go into detail about the FDIC's extraordinary powers, how and when they use them, and how they can affect a construction project.
Construction Law Today is a legal blog about construction contracts, disputes, finance, and the people whose job it is to deal with them.
