The President's Man: Leo Crowley and Franklin Roosevelt in Peace and War

By Stuart L. Weiss | Go to book overview

3
Cover-Up in the Capital, I

F or more than half a century, the Federal Deposit Insurance Corporation has protected the bank deposits of millions of Americans. As an agency it was -- and probably remains -- popular, but much of what is thought to be known of its origins is myth. The FDIC was established early in the first term of President Franklin Roosevelt, and it carries the banner of the New Deal, but it was the product of neither. It was promoted by senior congressmen of both major parties and imposed on the White House. Until Congress forced his hand, President Roosevelt, the archetypal New Dealer, opposed deposit insurance as an experiment that was tried in several states and failed.1

The Great Banking Crisis of March 1933 reopened an earlier debate over federal deposit insurance, but significant action did not occur until May 10. Then the House Banking and Currency Committee brought in an insurance bill that would cover deposits in an banks 100 percent to $10,000, after that on a sliding scale, the program to be financed by assessments on the banks enrolled in the system. Soon after, the Senate Banking Committee reported its own bill, which differed chiefly in excluding banks that were not members of the Federal Reserve System and in postponing implementation of the bill until July 1, 1934. Neither plan appealed to Michigan's Republican and junior senator, Arthur Vandenberg. He argued, first, that neither contained a ceiling on the deposits guaranteed, and second, that the Senate's more limited bill would not restore confidence in the nation's smaller banks. Vandenberg then proposed an amendment providing coverage for deposits in all banks beginning July 1, 1933, but with a "temporary fund" managed by the Federal Reserve Board and a $2,500 ceiling.2

The Vandenberg amendment obviously influenced passage of the Glass-Steagall Deposit Insurance Act that June. Nonmember banks

-33-

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