Money & Finance › Banks & credit › Commercial banks: taking deposits, making loans
FDIC deposit insurance (up to $250,000)
Since 1933; $250k since 2008· Institution or agency
Fact, law or dataA rule, statute, definition or measured number.
The Federal Deposit Insurance Corporation guarantees deposits at insured US banks up to $250,000 per depositor, per bank, per ownership category.
See it on the Money & Finance map →How it works
Created by the Banking Act of 1933, it began insuring deposits in 1934 at $2,500 per depositor. The limit rose to $100,000 in 1980 and $250,000 in 2008, made permanent in 2010. Banks pay premiums into the Deposit Insurance Fund. Ownership categories stack: individual, joint, retirement and trust accounts are insured separately, and an operating LLC's or corporation's account is insured apart from its owners'. When a bank fails, the FDIC usually sells it to another bank over a weekend.
Why it matters
It ended routine bank runs by small savers. Above the limit, deposits are at risk, which is why uninsured business accounts fled SVB in 2023.
Facts, rules and data
FDIC historical statistics show failures collapsing after 1934, and the FDIC says no depositor has lost insured funds since. Its online EDIE tool calculates any account's coverage.
Debates and risks
Whether to raise coverage for business payment accounts, which often exceed $250,000, is debated; the FDIC laid out options in 2023.
Inside this (1)
Connections (7)
▸FDIC deposit insurance (up to $250,000) was created to prevent Bank runs: when depositors all want out at onceFact, law or data
The connection
Runs happen because depositors who get out first are paid in full. Insurance removes the reason to rush: insured deposits are safe whether withdrawn today or never. Small savers stopped lining up, and only nine insured banks failed in 1934, after about 4,000 bank failures in 1933.
When and why
Banking Act of June 1933; coverage began January 1, 1934, in the depths of the Depression's banking collapse.
How we know
FDIC failure statistics; economists Douglas Diamond and Philip Dybvig modeled how insurance prevents runs (1983), work cited in their 2022 Nobel prize.
Debates and risks
Insurance stops only insured runs. Uninsured depositors pulled $42 billion from SVB in one day in March 2023; how far coverage should extend is debated.
▸FDIC deposit insurance (up to $250,000) can create Moral hazard: insurance and bailouts encourage riskMainstream view
The connection
Insured depositors have no reason to check their bank's risks, and bank owners can gamble with insured money: gains go to owners, large losses fall on the fund. The FDIC limits this with a coverage cap, risk-based premiums, capital rules and early intervention in weak banks.
When and why
Bankers and Franklin Roosevelt warned of it in 1933; it played out in the 1980s savings and loan crisis; a 1991 law brought risk-based premiums.
How solid is the link?
A World Bank study of 61 countries (Demirgüç-Kunt and Detragiache, 2002) found explicit deposit insurance raised the odds of banking crises, especially where supervision was weak.
Debates and risks
How much discipline uninsured depositors really provide is unclear; they tend to run rather than monitor, which complicates proposals to raise coverage.
▸The 1929 crash and the Great Depression led to the creation of FDIC deposit insurance (up to $250,000)Fact, law or data
The connection
Waves of bank failures wiped out savings and fed more runs, ending in the national bank holiday of March 1933. Representative Henry Steagall pushed deposit insurance past Roosevelt's and big bankers' doubts; Senator Arthur Vandenberg added a temporary fund that started January 1, 1934, made permanent in 1935.
When and why
Banking Act of 1933, signed June 16, 1933; made permanent by the Banking Act of 1935.
How we know
The statutes, congressional records of Steagall's and Vandenberg's roles, and the FDIC's official history.
Debates and risks
Historians debate how much credit deposit insurance deserves versus the bank holiday, leaving gold and capital injections from the Reconstruction Finance Corporation.
▸Savings and loan crisis (1980s–90s) led to FSLIC's merger into FDIC deposit insurance (up to $250,000)Fact, law or data
The connection
Savings and loans held low fixed-rate mortgages while paying soaring deposit rates in the late 1970s and 1980s. Deregulation let many gamble to recover, and over 1,000 failed. Their insurer, FSLIC, went broke, so Congress abolished it and moved thrift insurance to the FDIC, while the Resolution Trust Corporation sold off failed thrifts' loans and real estate.
When and why
FIRREA, signed by President George H.W. Bush in August 1989; the Resolution Trust Corporation operated from 1989 to 1995.
How we know
FDIC research (Curry and Shibut, 2000) put the cleanup cost at about $153 billion, about $124 billion of it borne by taxpayers.
Debates and risks
How to split blame among deregulation, fraud and regulators' delay in closing insolvent thrifts, which raised the cost, is still argued.
▸PBGC: the federal pension insurance agency is the pension-world version of FDIC deposit insurance (up to $250,000)Mainstream view
The connection
Both are federal insurers funded by premiums from the firms they cover. When a company's traditional pension plan fails, the PBGC takes it over and pays benefits up to a legal cap, about $7,400 a month at age 65 in 2025. It does not cover 401(k)s, and unlike the FDIC it lacks an explicit full-faith-and-credit pledge.
When and why
Created by ERISA, signed by President Ford in September 1974, after Studebaker's 1963 plant closing left thousands of workers with lost pensions.
How solid is the link?
ERISA's Title IV and PBGC annual reports; the comparison is structural, since both pool premiums to guarantee payments up to a cap.
Debates and risks
Its multiemployer program neared insolvency until a federal rescue in the 2021 American Rescue Plan; whether premiums are set high enough remains debated.
▸The US financial regulators include FDIC deposit insurance (up to $250,000)Fact, law or data
The connection
Besides insuring deposits, the FDIC is the main federal supervisor of state-chartered banks that are not Fed members, most of them community banks. It also takes over failed banks, usually on a Friday, selling them to healthy banks over the weekend so depositors have access on Monday.
When and why
Washington, DC, since 1933; its five-member board includes the Comptroller of the Currency and the CFPB director.
How we know
The Federal Deposit Insurance Act, FDIC annual reports and its public list of failed banks.
Debates and risks
Proposals to merge bank regulators, revived in 2025, raise the question of whether the FDIC, the OCC and the Fed should keep overlapping roles.
▸Brokerage accounts and SIPC protection (up to $500,000) is the brokerage-account cousin of FDIC deposit insurance (up to $250,000)Mainstream view
The connection
SIPC plays the FDIC's role for brokerages: if a brokerage fails and customer assets are missing, it covers up to $500,000 per customer, including $250,000 in cash. It replaces missing securities and cash, not losses from falling prices. Many brokerages sweep idle cash into partner banks, where it is FDIC-insured instead.
When and why
Securities Investor Protection Act of 1970, passed after a wave of brokerage failures in the late-1960s 'paperwork crisis'.
How solid is the link?
SIPC annual reports and court liquidations, including Madoff's, where trustee Irving Picard has recovered over $14 billion for victims.
Debates and risks
Fintech apps blur the lines: when middleman Synapse collapsed in 2024, many customers who believed they had FDIC coverage could not reach their money.