Definition: The Federal Deposit Insurance Corporation (FDIC) is an agency within the United States Department of the Treasury's Office of Thrift Supervision, which enforces deposit insurance laws for banks and savings institutions across the United States. The FDIC provides a $750 million reserve fund to cover potential losses resulting from financial failures by bank holding companies or other financial institutions. This fund is made up of investments in high-quality assets such as residential mortgage-backed securities (MBS) and U.S. Treasuries, which serve as a hedge against losses. The FDIC also plays a role in providing assistance to banks in cases where they are unable to satisfy their obligations under the Deposit Insurance Act, such as ensuring that depositors have access to emergency financial assistance or that customers can withdraw their money without fear of losing their deposits. In summary, the Federal Deposit Insurance Corporation (FDIC) is a government agency tasked with protecting investors from losses by holding back deposits at banks and other financial institutions. This includes providing insurance coverage for failed banks so they can continue paying out dividends to shareholders while also addressing potential problems such as loss of liquidity and credit risk.
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