ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Congress instated the Federal Deposit Insurance Act.
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Congress instated the Federal Reserve Act.
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Congress instated the Non-Withdrawal Act to stop people from taking out money unnecessarily.
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Congress blocked the old Customer’s Rights Act.
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Detailed explanation-1: -Additionally, the U.S. Congress established the FDIC in 1933. Created in response to the many bank failures that happened in the preceding years, this agency insures bank deposits.
Detailed explanation-2: -The Glass-Steagall Banking Act stabilized the banks, reducing bank failures from over 4, 000 in 1933 to 61 in 1934. To protect depositors, the Act created the Federal Deposit Insurance Corporation (FDIC), which still insures individual bank accounts.
Detailed explanation-3: -As a bank run progresses, it may become a self-fulfilling prophecy: as more people withdraw cash, the likelihood of default increases, triggering further withdrawals. This can destabilize the bank to the point where it runs out of cash and thus faces sudden bankruptcy.
Detailed explanation-4: -Deposit insurance If a bank collapses, the FDIC allows a bank with high capital reserves to acquire the vulnerable bank, together with its customers. The customers can then access their deposits in the new bank. In the worst cases, the FDIC may auction the collapsed bank’s assets to pay back depositors.
Detailed explanation-5: -What Was the Emergency Banking Act of 1933? The Emergency Banking Act of 1933 was a bill passed in the midst of the Great Depression that took steps to stabilize and restore confidence in the U.S. banking system. It came in the wake of a series of bank runs following the stock market crash of 1929.