https://haylibrary.cvlcollections.org/files/original/e395b450352425143a3e5d8f4c35b439.pdf e268d26fd24c44762a3d57667380990b PDF Text Text Q,uestions and Answers on Deposit Insurance The Federal Deposit Insurance Corporation Circular No. I August 1934 �FOREWORD Since Federal deposit insurance became effective on January x, 1934, a great many questions have been asked concerning what the FEDERAL DEPOSIT INSURANCE CORPORATION is and what it does. In the following pages these questions have been answered in the light of the law under which the insurance is afforded. It is hoped that this pamphlet will give depositors, in particular, and the general public as well, a clearer idea of what deposit insurance is doing for them. In actual results the plan has been eminently satisfactory. For example, insured deposits of four banks which have been closed since the Corporation went into operation were being paid on August I. It was estimated that 99 percent of their depositors would be paid in full. The depositors of closed insured banks are assured of immediate payment. In the four suspensions cited above the Corporation has begun paying depositors within ten days of the appointment of a receiver. Page2 �THE CORPORATION 1. Q What is the FEDERAL DEPOSIT INSURANCE CORPORATION and how was it established? A. It is a Corporation created for the purpose of insuring bank deposits. It was established by an act of Congress approved June 16, 1933. 2. Q Who controls the Corporation? A. A board of directors of three members. Two are appointed by the President by and with the advice and consent of the Senate. The other member is the Comptroller of the Currency, who serves ex officio. Not more than two directors can be from the same political party. 3. Q. Where are the offices of the Insurance Corporation? A. The main office is in Washington, D.C., and there are 15 district offices situated in various sections of the country. (A list of these district offices, with the territories they serve, is to be found on p. 10.) THE INSURANCE 4. Q. What is deposit insurance? A. The protection of depositors against loss of • their deposits in the event of bank failure. At the present time the maximum amount insured for each depositor is $5,000. 5. Q. When did the FEDERAL DEPOSIT INSURANCE CORPORATION begin insuring deposits? A. January 1, 1934. THE FUND 6. Q. What is the Temporary Federal Deposit Insurance Fund? A. A fund created by payments from insured banks. Page3 �~ 7. Q. How long will the temporary phase of deposit insurance continue? A. By act of Congress itis to continueuntilJuly 1, 193 5, when it will be replaced by the permanent plan. 8. Q . Is the FEDERAL DEPOSIT INSURANCE CORPORATION a permanent organization? A. Yes. g. Q. What is the source of the moneys of the Insurance Corporation? A. They come from three sources: A subscription from the Treasury of the United States of $150,ooo,ooo, a subscription from the Federal Reserve banks of about $140,000,000, and payments by insured banks. 10. Q. How large is the Fund and how are its moneys invested? A. At the present time it amounts to $320,000,000 and is being held in cash or invested in United States Government securities. The Corporation may also issue its bonds to the Reconstruction Finance Corporation to the amount of another $250,000,000, although this has not been done as yet. ELIGIBLE BANKS I I. Q. Do all banks have deposit insurance? A. All banks which are members of the Federal Reserve System (which includes all national banks in the United States and some State banks) were required by law to join the Temporary Federal Deposit Insurance Fund. State banks not members of the Federal Reserve System were free to apply for insurance or not as they chose. The great majority of them are now insured. Q. How are insured banks to be distinguished? A. After October 1, 1934, insured banks will 12. carry the insignia of the F.D.l.C. at their receiving windows. (A reproduction ofit is to be found on p. I 1.) Further, they ha.,ve been supplied with a certificate of membership which they will be glad to show you. Page4 �' I 3. Q. How many banks are members ef the fund? A. On August 1, 1934, there were 14,054 of the nation's banks in the fund. Of these, 963 were State member banks of the Federal Reserve System, 5,438 were national banks, and 7,653 were State nonmember banks. 14. Q. Can mutual savings banks become insured by the Corporation? A. Yes. The benefits of deposit insurance are available to mutual savings banks. 15. Q. Can savings banks become members ef the Temporary Federal Deposit Insurance Fund? A. Yes; together with all banks doing a deposit business they are free to apply for insurance. 16. Q. Among insured banks, wlzy has interest on demand deposits been prohibited and a maximum interest rate set for time and savings deposits? A. Under the Banking Act of 1933, banks which are members of the Federal Reserve System are prohibited from paying any interest on demand deposits and it is made the duty of the Federal Reserve Board to adopt regulations prescribing the maximum rates of interest to be paid on time and savings deposits. To carry out this policy and in the interest of sound banking the Federal Reserve Board set the maximum rate of interest at 3 percent on time and savings deposits. The member banks to which this regulations applied were required to insure their deposits. Other banks were permitted to insure their deposits upon voluntary application. Congress declared that all banks should enjoy equally the benefits of insurance. In order to secure such equal enjoyment it was necessary for the FEDERAL DEPOSIT INSURANCE CORPORATION, by regulation, to prevent the banks which were not members of the Federal Reserve System from paying any interest on demand deposits and from paying a higher rate of interest on time and savings deposits than could be paid under the lawful regulations of the Federal Reserve Board. An important Page5 �~ attribute of sound banking has thus been extended to all insured banks. CLOSED BANKS 17. Q. Wizen a bank is closed through inability to pay its depositors, does the Insurance Corporation make the insured portion of deposits immediate?J available? A. Yes. Just as soon as a receiver or liquidator has been put in charge the Insurance Corporation proceeds to make the insured deposits available to the depositors. 18. Q. What is the method for making available to the depositors the insured amount of their deposits? A. A new national bank is immediately set up by the F.D.I.C. to pay the insured deposits of the closed bank. 19. Q. Does the new national bank set up by the F.D.1.C. pay interest on the insured accounts of the closed institution? A. No. Interest is not paid on the insured accounts of closed institutions. 20. Q. What happens to a closed bank after tlze Corporation has taken over the insured deposit liability? A. A closed bank is placed in liquidation. If it be a national bank the Comptroller of the Currency appoints the Corporation as receiver. If it be a State bank the Corporation may or may not be appointed receiver, depending upon whether the State law authorizes such appointment and upon the discretion of the appointing power. To facilitate liquidation the Corporation may purch~e the assets of the closed bank if it be a member of the Federal Reserve System. 2 1. Q. Does the Corporation pay the insured deposits regardless of the reason for failure of a closed bank? A. Yes. The purpose of deposit insurance is to prevent loss to depositors and hence the reason for failure does not influence the Corporation's liability. Page6 ! �DEPOSITS INSURED 22. Q. What is meant by the phrase "owner of a claim arising out of a deposit liability" of a closed bank? A. Any person holding evidence of a bank's deposit obligation to him or evidence of some debt arising from the bank's deposit obligations is considered the owner of a claim against the deposit liabilities of a closed bank. 23. Q. Are any deposits preferred under the scheme of deposit insurance? A. No. All share equally in the benefits of deposit insurance. 24. Q. Do all types of deposits have the benefits of insurance? A. Yes. All types of personal and corporate deposit obligations, deposits of public funds, and deposits of other banks in insured banks are included in the plan. Trust funds awaiting investment are also included in this insurance. 25. Q. Must' a depositor have $5,000 in his account before he can enjoy insurance benefits? A. No. Five thousand dollars is the insured limit for one depositor and all amounts up to and including that are fully insured. Accounts larger than that are insured up to $5,000. This does not mean that a depositor with an account of $100 will be paid $5,000 in the event his bank closes, but it does mean that he will get all of his $100. 26. Q. What proof of his claim is it necessary for a depositor in a closed bank to present in order to bepaid his insured deposit? A. His pass book, certificates, or other evidence of the closed bank's deposit debt to him and some means of personal identification are sufficient proof of the depositor's claim. 2 7. Q. If a depositor has billsfalling due and his bank is closed, can he check against the insuredportion ofhis account? A. No. The closed bank will be in the hands of the receiver. However, the new bank of the Page 7 �<:> Insurance Corporation will make immediately available the insured amount due him so that he will not be greatly inconvenienced. 28. Q. How does the Corporation pay the iT1Sured deposits? A. As the claims of depositors are approved and allowed, orders are issued which may be paid at once or through the Federal Reserve bank of the Reserve district where the closed bank is situated. 29. Q. May the depositor get the insured portion of his account in cash? A. Yes. The depositor may be paid in cash if he so desires. 30. Q. If a bank customer has unused traveler's checks in his possession at the time the issuing bank suspends, will they be accepted as claims against the insured deposit liabiliry of the bank? A. If the traveler's checks issued by the closed bank are the outgrowth of the holder's deposits they are acceptable to the limit of the insurance. 3 r. Q. If the books of a bank show that a husband and wife each have an account in each of their names and, in addition, have a jointly owned account, does each of these accounts come under the benefits of the insurance and are they considered separately in determining the amount due under the insurance limit? A. Yes; if the accounts are in fact owned as shown on the bank records. In the case of the jointly owned account, however, the right of survivorship must have been provided. 32. Q. If an estate of $20,000 is being held in a closed bank and there are four heirs to share equally in it, is the account thus fully insured? A. If the title of the · account states the names of the four heirs and specifies that they are to share equally, the account is separately owned in four equal undivided parts and the individual owners are fully protected. If the title is not so held the account is considered as a unit and the amount payable by the Insurance Corporation is limited to the maximum of $5,000. PageB �---~ . Q. Wo~ld it be po~sible to take four equal negotiable certificates of deposit for an account of $20,000 33 and thus procure full insurance? A. No. This would cause their holder to be an owner in the same right and in the same capacity and, hence, his insurance claim would be limited to $5,000. If after taking them out the original owner subsequently transferred them to four separate persons in the usual course of business, each of those holders would, however, have an insured claim. Page9 �.sFEDERAL DEPOSIT INSURANCE CORPORATION DISTRICT OFFICES AND TERRITORIES SERVED District No. r.-Boston, Mass.: Massachusetts Maine, New Hampshire, Vermont, Rhode Island: and Connecticut. District No. 2.-New York Ciry: New York, New Jersey, and Delaware. District No. 3.-Columbus, Ohio: Ohio and Pennsylvania. District No. 4.-Richmond, Va: District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and West Virginia. District No. 5.-Atlanta, Ga.: Georgia, Alabama, Florida, Mississippi, and Louisiana. District No. 6.-Louisville, Ky.: Kentucky, Tennessee, and Indiana. District No. 7.-Springfield, Mo.: Missouri and Arkansas. District No. 8.-Chicago, Ill.: Illinois and Iowa. District No. 9.-Madison, Wis.: Wisconsin and Michigan. • District No. ro.-St. Paul, Minn.: Minnesota, North Dakota, and South Dakota. District No. II.-Kansas Ciry, Mo.: Kansas, · Nebraska, and Oklahoma. District No. 12.-Dallas, Tex.: Texas and New Mexico. District No. 13.-Salt Lake Ciry, Utah: Montana, Utah, Nevada, Wyoming, Colorado, and Idaho (southern counties). District No. 14.-Seattle, Wash.: Washington, Oregon, and Idaho (northern counties). District No. 15.-San Francisco, Calif.: California and Arizona. Page ro �A A A A A A (I OEPOSIT~v INSURED The Federal Deposit Insurance Corporation WASHINGTON, D. C. MAXIMUM INSURANPE $5000 $5000 FOR EACH DEPOSITOR NoTE.-The above sign is .being displayed • at the receiving windows of all insured banks. effective October 1, 1934. Mutual savings banks operate under a separate fund and have the privilege of electing $2,500 or $5,009 as the maximum insurance V V V V V V 79527°-M U, S, GOVERNMENT PRINTING OPflCE I IIU � Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Union Pacific Collection Description An account of the resource This collection is made possible in part by a generous grant from Wyoming Humanities. All materials are the property of Union Pacific Coal Company, on long-term loan at Western Wyoming Community College. For usage inquiries, contact the <a href="https://www.uprrmuseum.org">Union Pacific Museum</a> Text A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text. Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Deposit Insurance 1934 Rights Information about rights held in and over the resource CC BY-NC-ND Date Created Date of creation of the resource. August 1934 Subject The topic of the resource Deposit Insurance, 1934 Description An account of the resource A booklet answering questions about Deposit Insurance. It is stored in an orange file with Workman's Compensation files. Type The nature or genre of the resource Text Creator An entity primarily responsible for making the resource The Federal Deposit Insurance Corporation Identifier An unambiguous reference to the resource within a given context 1-0239 Publisher An entity responsible for making the resource available The Union Pacific Coal Co.