Enhance Digital Signature Legitimacy for Banking in the United States

How to eSign a document: digital signature legitimacy for Banking in United States

- [Narrator] This is a run on a bank. This is also a run on a bank. And while these people lost their money, these people didn't thanks to a government agency designed back then. - [President Roosevelt] We do not want and will not have another epidemic of bank failures. - [Narrator] The FDIC exists to ensure your money is safe and that bank closures don't rattle the US economy. Here's how it works and what happens when your bank fails. Let's start back with these people in the middle of the Great Depression. They were afraid their banks would go out of business and their money would vanish, so they'd run to withdraw it all first. But the issue, as President Franklin Roosevelt explained at the time, was- - [President Roosevelt] When you deposit money in a bank, the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit. - [Narrator] He means your bank doesn't have enough cash on hand to pay out all their accounts at once, not back then or today. So during a run, the bank would have to suspend business and most would then completely fail. Thousands of them did, which just made other people panic about their money, so they'd run to their bank. - And that's how a bank run on one bank can become contagious to other banks. - [Narrator] So FDR signed the Banking Act of 1933, creating the Federal Deposit Insurance Corporation, the FDIC, to make people have faith their money was safe in a US bank. It worked. - [President Roosevelt] Your government does not intend that the history of the past few years shall be repeated. - [Narrator] The FDIC is what it sounds like, insurance. For every $100 you deposit, your bank has to put a few cents into the FDIC'S Deposit Insurance Fund. This is what's used to reimburse you, the depositor, should your bank fail, but only up to a certain amount. Currently, if you have $250,000 or less in a bank, all that money is insured. Any amount in a bank account over that is uninsured. You could in theory lose it if the bank fails. This applies not only to personal accounts, but also to businesses. When a bank is on the brink of failure, the FDIC, along with a regulatory agency, gets involved. Typically, they arrange to sell the bank to another usually larger bank, then close the failed bank, trying to make the process seamless for the bank's customers. - Taking the failed bank, selling it to a healthy bank will ensure that there's continuity of services to the community that the bank serves, not just protecting insured deposits, which the FDIC always does, but usually the buyers would pay enough to cover the uninsured, too. They wanted the uninsured 'cause those were large deposits. And then also continue servicing the loans, keep the credit lines open, you know, all the services the bank provides. - [Narrator] Over the years, most failed banks have been small. Here they are skilled by size, except for this one, Washington Mutual in 2008, the largest bank failure in US history. Most of the accounts, primarily personal accounts, were insured, and the bank was sold for enough money to cover the insured, no need to even touch the Deposit Fund, but also cover the uninsured accounts. But the bank failures of 2023 haven't been routine. With Silicon Valley Bank, the vast majority of depositors had accounts with more than $250,000, so they're uninsured. It's a lot of businesses, and because the bank began to fail so quickly, the FDIC hadn't lined up a buyer before they had to close it. - Their deposit base was a very close-knit group of VCs and their portfolio companies, and word just spread like fire. You know, when a couple of 'em got worried, they all started to run. - [Narrator] So the US announced- - All customers who had deposits in these banks can rest assured, I wanna rest assured they'll be protected. - [Narrator] Experts say guaranteeing not just the insured but also the uninsured was aimed at stopping any further economic damage from these businesses not making payroll, but also might have stopped other uninsured account holders from running. - If the uninsured depositors in bank A can't access their funds, that's going to make the depositors in bank B nervous. We have contagion, and then we're back to 1933. - [Narrator] Reimbursing all these depositors will come from the eventual sale of the bank and also from the insurance fund. Many experts are worried the amount banks have to contribute may go up, so your bank fees could, too, a process that while messy worked the way it was designed nearly 100 years ago. - [President Roosevelt] I can assure you, my friends, that it is safer to keep your money in a reopened bank than it is to keep it under the mattress. - I think on the one hand, FDR would be wincing and saying, "Oh man, I thought we wouldn't have screw ups like this. On the other hand, I think he would smile and say, "Ah, it didn't spread. "We haven't had contagion. "We haven't had widespread runs. "That was my goal in creating the FDIC."