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Article: FDIC losses in bank failures: has FDICIA made a difference?(Federal Deposit Insurance Corporation)(FDIC Improvement Act)
- Article from:
- Economic Perspectives
- Article date:
- September 22, 2004
- Author:
CopyrightCOPYRIGHT 2004 Federal Reserve Bank of Chicago. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Introduction and summary
Banks are generally failed and placed in receivership when the value of their assets declines below the value of their deposits and other debt, so that the value of their capital (net worth) becomes negative. The losses exceed the ability of the stockholders to absorb them. As a result, some of their creditors, and in the United States also the Federal Deposit Insurance Corporation (FDIC), which stands in the shoes of, at minimum, the insured depositors up to the insurance coverage ceiling, are likely to suffer losses. Because the FDIC is a federal government agency, if losses from bank failure resolutions are sufficiently high to exceed ...