Asset Liquidation Agreement (ALA)

Finance allah shmoop What is the f d i C

the dick that's How you pronounce it there in the

wall street art federal deposit insurance corporation That's what it

is but what is it Well it's insurance bank insurance

Can you think of anything more boring That is when

you deposit eleven thousand three hundred forty two dollars of

wedding cash that was stuffed in your spouses Undergarments from

the you know the money dance into your bank of

america account Well you don't have to worry that it'll

ever just disappear So why is that even a thing

like why do you even have to worry about money

disappearing in a bank Well in the great depression which

was way more severe than the pretty good depression that

happened twenty years earlier late nineteen twenties early nineteen thirties

while banks did in fact collapse there was panic The

population raced to the banks to withdraw all of their

cash Teo you know stick under their mattresses And since

banks on lee carried on hand maybe a few percent

five maybe ten percent of their total deposits like all

the rest was invested in stocks or loaned in home

Mortgages or for the brand new hot off the line

butter churn or three thousand they didn't have the money

The bank simply didn't have the cash when it was

demanded by customer depositors and well bad things happen when

they turned their pockets inside out It was panic and

about a third of all banks simply failed the population

for a brief moment in time lost trust in the

american banking system and had to really really really bad

like imagine trying to get a mortgage in somalia today

Like would you trust a somalian bank Tough room So

the government created the dick fbi see as a kind

of insurance company guaranteeing that bank defaults won't happen again

So the initial insurance limit was set at twenty five

hundred bucks per ownership category like one deposit or but

remember that nineteen thirty three twenty five hundred bucks could

buy you like a house So that was a lot

of money back then A variety of laws were passed

in the near century since then and today the fbi

see insures up to two hundred fifty thousand dollars per

ownership category Well with that limited place banks are more

Or less insured against anything disastrous befalling them although you

know if a bank fails uncle sam can just come

on in and bail him out Yeah it's good to 00:02:24.745 --> [endTime] be a bank Thank you very much