Understanding Bank Failures and FDIC Insurance- A Review of Historical and Current Data
The term “bank failures” means that a financial institution cannot pay its depositors and creditors and has declared its operations insolvent. Often, the state or federal regulator, through the currency comptroller, has the authority to declare a bank as a failure. When a bank fails, it is the role of the Federal Deposit Insurance Corporation (FDIC) to ensure the funds’ depositors are saved, and this also includes assets in the form of money markets. Over the years, several banks in the United States have “failed.” For instance, even though none of the banks failed in 2021 and 2022, this scenario was experienced in 2020. Almena State Bank, First City Bank of Florida, The First State Bank, and Ericson Bank failed in the mentioned fiscal year.
However, in 2018, the FDIC did not record any bank failures, but in 2017, the United States recorded several bank failures. During this period, financial institutions, such as Washington Federal Bank for Savings, The Farmers and Merchants State Banks of Argonia, Fayette County Bank, Guaranty Bank, and Best Bank, were declared insolvent (FDIC | Failed bank list, n.d.). In 2019, the total deposits and assets held by banks that were acquired by other financial institutions for inability to refund depositors, such as The Enloe State Bank, Louisa Community Bank, Resolute Bank, and City National Bank of New Jersey, totaled $214.1 million (FDIC: Bank failures in brief, n.d.). Lastly, according to the FDIC report, no banks recorded a failure to pay creditors and depositors. Bank failures can be prevented by creating fiscal policies that require financial institutions to insure depositors or to seek help from the Federal Reserve when on the verge of failing.
I have learned from the above exercise that bank failures occur when financial institutions cannot meet the obligations of depositors and creditors. Additionally, I am now aware that the FDIC regulates failed banks and that when these entities are threatened by insolvency, they can seek assistance from the Federal Reserve. In the future, I intend to use this information to advise the financial institution I will work for to insure its deposits to avoid a “failure” scenario.
References
FDIC | Failed bank list. (n.d.). FDIC: Federal Deposit Insurance Corporation. https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/
FDIC: Bank failures in brief. (n.d.). FDIC: Federal Deposit Insurance Corporation. https://www.fdic.gov/bank/historical/bank/
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Question 
In your initial response to the topic, you have to answer all the questions:
What does the term “bank failure” mean? What role does FDIC insurance play?
How many bank failures occurred in the United States during the current calendar year?
How many bank failures occurred in the United States during 2020?
Understanding Bank Failures and FDIC Insurance- A Review of Historical and Current Data
How many bank failures occurred in the United States during 2018?
How many bank failures occurred in the United States during 2017?
What were the total assets and deposits the banks held that failed during 2019? (To see the data for total assets, you need to log on to the website we provided for the discussion and click on Bank Failure in Brief. This is the second link from the top. You must scroll down the page to see the table with total assets. If you click on the year in the table Closing Summary on the same page, you will see the list of bank failures for that year with the total assets and deposits for each bank.)
How many banks failed in 1937?
How it is possible to prevent bank failure?
Reflection – the students also should include a paragraph in the initial response in their own words, using macroeconomic terminology, reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace and in everyday life.