Should Americans worry about 'FDIC Friday?' 

More than 70 U.S. financial institutions have failed in 2010, according to the Federal Deposit Insurance Corporation (FDIC).  When a bank is no longer sound, the FDIC steps in to safeguard depositors’ money and liquidate the failed institution.

The FDIC has been busy so far in 2010, and it had a busy 2009 as well – 140  FDIC-insured institutions failed last year. When the FDIC has to announce a bank has failed, it usually does so on a Friday, sometime after 5pm, which has inspired the phrase “FDIC Friday.”

So – should Americans dread the approach of FDIC Friday?

While each individual bank failure is bad news, one should not lose perspective as the failures mount. The number of bank failures is very small compared to the overall number of U.S. banks – there are about 8,000 banks and savings associations where the FDIC insures deposits.

There are other grounds for optimism. It ought to be remembered that, from the very earliest days, the United States has been extraordinarily lucky during periods of financial difficulty. It’s almost a historic tradition for public-spirited individuals of great ability to come forward with smart ideas that help stabilize American finances, just when those ideas are needed most.

At the time of the War of Independence against King George, for example, innovative thinkers like Alexander Hamilton and Robert Morris stepped forward and put the 13 colonies’ finances on an even keel.

During the Civil War, financier Jay Cooke and Treasury Secretary Salmon Chase found various ways to maintain the North’s creditworthiness, so that President Lincoln could mobilize the nation’s resources and save the Union.

And in 1934, during the Depression, FDR appointed Utah banker Marriner Eccles as Chairman of the Federal Reserve. Eccles had succeeded in preventing the banks he managed from failing during those difficult years. He brought that same dedication to financial stabilization to his work as Chairman.

Morris, Hamilton, Cooke, Chase, Eccles.  Keep these names in mind (there are many other examples, of course) if you happen to visit the FDIC’s website some Friday to see if any additional banks have failed. And remember – American optimism and creativity have overcome all sorts of difficult economic challenges over the years. As long as they maintain their optimism and creativity, Americans can do it again.


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Neil Hrab

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