Federal Deposit Insurance Act of 2005

Federal Deposit Insurance Act of 2005

Legislation in the United States that created the Deposit Insurance Fund, which insures American banks and thrifts. Before the passage of the Act, banks and thrifts were separated into two insurance pools. While this was likely beneficial for a time because of the savings and loan crisis, it created a perverse incentive for banks and thrifts to reclassify themselves as the other (i.e., a bank to a thrift or a thrift to a bank), depending on which fund had lower fees. The Federal Deposit Insurance Act abolished these two funds to simplify banking regulation.
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