As a beginner in economics im not educated in this field. Why does the gov insure banks? As in what way(s) does it do this and what is it trying to protect or insure by doing so? Dont be afraid to go in detail if necessary as im very interested to hear what you have to say. Thanks yahoo chaters
Simple, so the ordinary people will have confidence in the banking system and deposit money into banks which the banks can then lend out and finance growth.In a nutshell it is simply explained as the FDIC (Federal Deposit Insurance Corp) If you put $4,000.00 in a bank, and the bank becomes insolvent then the FDIC uses it's power to take over the bank. sell off it's investments and reimburse depositors. The FDIC does not reimburse investments, because all investments involve the risk of loss.
So that we don't have another economic crisis like the great depression. ( at least that was the theory when it was begun)
