Paul Sanchez
Franklin D. Roosevelt, or FDR, was the 32nd President of the United States, serving four terms in office. FDR is known for his New Deal, a series of programs designed to help America recover from the Great Depression. As part of the New Deal, FDR created the Federal Deposit Insurance Corporation (FDIC) in 1933 to protect bank depositors and restore public confidence in the banking system. FDR also advocated for mandatory health insurance and was a key proponent of national health insurance, although his efforts in this area were not fully successful.
| Characteristics | Values |
|---|---|
| Year | 1933 |
| Creator | Franklin D. Roosevelt |
| Objective | To protect bank depositors and ensure financial security |
| Background | Great Depression, 4,000 bank failures between 1929 and 1933 |
| Legislation | Glass-Steagall Act, Banking Act of 1933 |
| Function | Insure deposits in eligible banks against loss |
| Impact | Increased public confidence in the banking system |
| Related Programs | New Deal, Social Security Act, Wagner National Health Act |
| Coverage | Savings in banks, unemployment, old age |
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What You'll Learn
FDR's New Deal
Franklin D. Roosevelt's New Deal was a series of sweeping economic, social, and political reforms enacted in the United States between 1933 and 1938. The reforms were in response to the Great Depression, which had begun in 1929.
Roosevelt first introduced the phrase "New Deal" in his acceptance speech after being nominated as the Democratic Party's presidential candidate in 1932. He promised a "new deal for the American people" and committed to carrying out several elements of what would become the New Deal, such as unemployment relief and public works programs. Roosevelt won the election in a landslide, and his administration immediately set to work on the New Deal.
During his first 100 days in office, Roosevelt introduced what historians refer to as the ""First New Deal." This initial phase focused on the "3 R's": relief for the unemployed and poor, recovery of the economy to normal levels, and economic reforms. The First New Deal included the creation of several agencies, such as the National Recovery Administration (NRA), which allowed industries to create "codes of fair competition"; the Securities and Exchange Commission (SEC), which was created to prevent insider trading that could harm investors; and the Agricultural Adjustment Administration (AAA), which aimed to raise rural incomes by controlling production.
The First New Deal also included public works programs, such as the Civilian Conservation Corps (CCC), which enlisted young men for manual labor on government land, and the Tennessee Valley Authority (TVA), which promoted economic development in the Tennessee River basin. While the First New Deal helped many find work and restored confidence in the financial system, by 1935, unemployment still exceeded 20%, and stock prices had not recovered to pre-Depression levels.
From 1935 to 1938, the "Second New Deal" introduced further legislation and agencies focused on job creation and improving conditions for the elderly, workers, and the poor. The Works Progress Administration (WPA) supervised the construction of bridges, libraries, parks, and other facilities, while also investing in the arts. The National Labor Relations Act guaranteed employees the right to organize trade unions, and the Social Security Act introduced pensions for senior citizens and benefits for the disabled, mothers with dependent children, and the unemployed. The Fair Labor Standards Act prohibited oppressive child labor and established a 40-hour workweek and a national minimum wage.
The New Deal programs helped improve the lives of people suffering from the effects of the Great Depression and set a precedent for the federal government to play a key role in the nation's economic and social affairs.
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The Glass-Steagall Act
The Act also introduced what became known as Regulation Q, which prohibited the payment of interest on checking accounts and gave the Federal Reserve authority to establish ceilings on the interest that could be paid on other types of deposits. The view was that paying interest on deposits led to excessive competition among banks, causing them to engage in risky investment and lending policies. Additionally, the Glass-Steagall Act created the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits with a pool of money collected from banks. This provision was controversial at the time and almost led to the rejection of the bill.
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The Federal Deposit Insurance Corporation
Before the FDIC's creation, more than one-third of banks failed, and bank runs were common. The FDIC was created in response to the thousands of bank failures that occurred in the 1920s and early 1930s. The insurance limit was initially US$2,500 per ownership category, and this has been increased several times over the years. The FDIC insures deposits in member banks up to $250,000 per ownership category, and since its inception in 1933, no depositor has ever lost FDIC-insured funds.
The FDIC is responsible for insuring deposits, examining and supervising financial institutions for safety, soundness, and consumer protection, making large and complex financial institutions resolvable, and managing receiverships. It is funded through insurance assessments collected from its member depository institutions and held in what is now known as the Deposit Insurance Fund (DIF). The proceeds in the DIF are used to pay depositors if member institutions fail.
Over the years, the FDIC has played a crucial role in stabilizing the financial system. During the 2008-2009 financial crisis, the FDIC, under the leadership of Chairman Sheila Bair, was at the forefront of the government's response. The FDIC also introduced the Temporary Liquidity Guarantee Program (TLGP), an emergency program that allowed the FDIC to guarantee certain bank debts and offer unlimited deposit insurance on specific business accounts.
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The Social Security Act
Franklin D. Roosevelt's New Deal administration set the precedent for successive governments to consider the role of the state in providing healthcare for the nation. In January 1935, Roosevelt proposed the Social Security Act, which was signed into law in August of that year. The Act established a system of federal old-age benefits, enabling states to provide more adequate support for aged persons, blind people, dependent and disabled children, and maternal and child welfare.
> "I see no reason why every child, from the day he is born, shouldn’t be a member of the social security system. When he begins to grow up, he should know he will have old-age benefits direct from the insurance system to which he will belong all his life. If he is out of work, he gets a benefit. If he is sick or crippled, he gets a benefit….I don’t see why not. Cradle to the grave-from the cradle to the grave they ought to be in a social insurance system."
The 1939 Amendments to the Social Security Act created two new benefit categories: Payments to the spouse and children of a retired worker, and payments to the family of an insured worker in the event of the premature death of the worker.
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The Wagner National Health Act
Franklin D. Roosevelt's New Deal set a precedent for the role of the government in securing the nation's health. Roosevelt's administration hosted a National Health Conference in Washington, D.C., in July 1938, which brought together stakeholders to discuss recommendations for reform. This led to the creation of the Wagner National Health Act, which proposed federal funding for states to expand public health services, including maternal and child health services, medical care for low-income individuals, short-term disability insurance, hospital construction, and prepaid medical insurance.
Senator Robert Wagner introduced the Wagner National Health Act, initially as S. 1050 to the 79th Congress (1945-1946) with financing, and later without financing as S. 1606 to the same Congress. Companion legislation was also filed by Representative John Dingell. The Act would have created a national health insurance plan, administered by the Surgeon General's office, covering most benefits except for dental and home-nursing care. It proposed that all U.S. residents who had received wages in 6 of the previous 12 quarters would be eligible for the program, as well as all seniors eligible for Social Security benefits and their dependents.
The Wagner-Murray-Dingell bill influenced subsequent health legislation, such as the Hill-Burton Hospital Survey and Construction Act of 1946, which incorporated a title from the original bill. Additionally, the National Health Act of 1945, also known as S. 1606, and the National Health Act of 1939, chaired by Senator James Murray, further advanced the discussion around national health reform and universal health insurance programs.
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Frequently asked questions
Yes, FDR created the Federal Deposit Insurance Corporation (FDIC) in 1933 to protect bank depositors and ensure trust in the American banking system during the Great Depression.
The FDIC was created in response to the thousands of bank failures that occurred in the 1920s and early 1930s, which caused a loss to depositors of about $1.3 billion.
The FDIC helped restore confidence in the American banking system and insured the savings of average citizens. It also encouraged people to save their money in banks during the Great Depression.
FDR advocated for mandatory health insurance and was a proponent of national health reform. He included health insurance in the Social Security Act of 1935 and the Wagner National Health Act of 1939, but these efforts did not fully succeed.
FDR implemented sweeping reforms during his four terms, including the New Deal, which expanded the role of the federal government in areas such as employment, agriculture, emergency relief, and health. He also created the Securities and Exchange Commission (SEC) to regulate financial markets and signed the Glass-Steagall Act to separate commercial banking from investment banking.
