The FDIC Makes Financial Returns Predictable at the Cost of Growth
The U.S. financial regulator protects households and financial elites alike from the worst downsides of economic crashes. But in achieving stability, it also slows the development of new industries.
With just under 6000 staff and a budget of $2.3 billion as of 2022, the Federal Deposit Insurance Corporation (FDIC) is one of the key government regulators of the U.S. financial system.1 The corporation’s core purpose is to administer the Deposit Insurance Fund (DIF), a mandatory financial insurance product for U.S. consumer-facing banks, which guarantees the first $250,000 of every bank account in case of a bank collapse. It is also tasked with the messy technocratic work of administering the management and dissolution of collapsed banks, the details of which it can outsource to favored financial contractors like BlackRock, and has a host of supervisory responsibilities and emergency powers to prevent such collapses in the first place.