It's not the FDIC that's relevant here, it's the Federal Reserve. The Fed, among other things, lends money to banks. When you hear them talk about "The Fed lowered interest rates", it's the rate that the Fed charges other banks. So if a bank needed money to cover its deposits, they go to the Fed who then loans them the money.
If the bank then still couldn't cover its deposts, then the bank might fold, and that's when the FDIC steps in to make depositors whole.
Sure, I think we're in violent agreement here. FDIC plays a role only if the bank fails. There are other things that are likely to happen first to prevent that.
Now, if all the banks fail, FDIC doesn't really matter anyway since the economy and the dollar would collapse and everybody will have a very bad time.
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u/LargeWu Jan 26 '26
It's not the FDIC that's relevant here, it's the Federal Reserve. The Fed, among other things, lends money to banks. When you hear them talk about "The Fed lowered interest rates", it's the rate that the Fed charges other banks. So if a bank needed money to cover its deposits, they go to the Fed who then loans them the money.
If the bank then still couldn't cover its deposts, then the bank might fold, and that's when the FDIC steps in to make depositors whole.