Federal Deposit Insurance Corporation

In 1983, the Federal Deposit Insurance Corporation celebrated its 50th anniversary by issuing a history that began with this passage:

" 'On March 3 banking operations in the United States ceased. To review at this time the causes of this failure of our banking system is unnecessary. Suffice it to say that the government has been compelled to step in for the protection of depositors and the business of the nation.'

"As President Franklin D. Roosevelt spoke these words to Congress on March 9, 1933, the nation's troubled banking system lay dormant. More than 9,000 banks had ceased operations between the stock market crash in October 1929 and the banking holiday in March 1933. The economy was in the midst of the worst economic depression in modern history.

"Out of the ruins, birth was given to the FDIC three months later when the President signed the Banking Act of 1933. Opposition to the measure had earlier been voiced by the President, the Chairman of the Senate Banking Committee and the American Bankers Association. They believed a system of deposit insurance would be unduly expensive and would unfairly subsidize poorly managed banks. Public opinion, however, was squarely behind a federal depositor protection plan.

"By any standard, deposit insurance was an immediate success in restoring stability to the system. The bank failure rate dropped precipitously, with only nine insured banks failing during 1934. During the 30-year period beginning with World War II,the workings of the economy and the conservative behavior of bank regulators and the banking industry created a situation that posed few risks to the financial system, and the importance of deposit insurance in maintaining stability declined. Indeed, Wright Patman, the then-Chairman of the House banking committee, argued in a speech in 1963 that there were too few bank failures - that we had moved too far in the direction of bank safety. ''

In 1997, a follow up volume had a very different focus -- "the extraordinary number of bank failures in the 1980s and early 1990s.'' The wave of failures that came to be know as the savings and loan crisis and led to a reshaping of the F.D.I.C. and new attention to the importance of tight regulation of banks holding federally insured deposits.

Changes in the marketplace and in the legal landscape kept banking in turmoil, but few banks were failing. The collapse of the housing market and the credit crunch that followed in 2007 raised new worries, however, and by the spring of 2008 the F.D.I.C. was warning that the banking sector was facing alarming new strains. In July 2008 Indymac, a California-based bank, was seized by the agency as its mortgage-related losses mounted. Suddenly, the notices posted in financial institutions that they are "F.D.I.C. insured'' -- meaning that deposits are covered up to $100,000 -- were of interest again.