Question

What was the important goal of the Federal Deposit Insurance Corp (FDIC), which was an integral part of the Banking Act of 1933?
A. To prevent massive bank failure such as what was experienced between 1929 and 1932.
B. To encourage Americans to refrain from using their savings to invest in the stock market.
C. To offer cheap mortgage insurance to struggling Americans.
D. To increase bank reserves in order for banks to lend credit to American businesses.
E. To convince sceptical Americans about the safety of depositing their money in re-opened banks.

Answer 1

Hint: The Great Depression of 1929 saw the crash of the stock market. This economic event was characterised by a cycle of depreciation (decrease in asset values) as people withdrew their money from deposits and investors refused to continue spending capital.

Complete answer: - The FDIC was created to protect the supply of money and cover insurances as these measures would help restore the common man’s trust in the banking system. It is one of the three federal agencies that govern commercial banks in America.
- The other agency is the National Credit Union Administration. It was created in 1970 and is headquartered at Alexandria, Virginia. The act that brought it into place is mostly deemed as being successful.
- It was created by the Congress as an agency to ensure stability and founded by then-President Franklin Roosevelt and is headquartered at Washington DC, the capital of the United States of America.
- The other options are just other events in the Great Depression which were eventually tackled by these agencies. Mortgage insurances were encouraged as it helped the common man secure loans they perhaps otherwise wouldn’t have been able to.
Therefore, option A is correct.

Note: This had been negatively influenced by the UK’s decision to change the value of the Pound (their national currency) to its value before the War. The Banking Act of 1933 (also termed the Glass-Steagall act) paved the way for its establishment. The act of the same name in 1935 made its status permanent. Discussion about the same was lengthy and intense.