Why did FDR create the Federal Deposit Insurance Corporation?

Answer 1

When the stock market crashed, everyone panicked and withdrew their money from their banks. Banks did not keep all of the money, they loaned money out etc. The banks could not pay all those who were wanting to withdrawal their money. As a result, the banks failed. Many people lost their life savings. In order to try and restore some faith into banks, Roosevelt put the FDIC in place. The FDIC guarantees up to 250,000 per depositor, per insured bank, for each ownership account. This means you can have multiple accounts and your money will be insured up to 250,000. Having multiple accounts protects you if you have large amounts of money. Roosevelt put many plans and programs in place in order to try and jump start the economy. His plan proved successful.

Answer 2

To prevent future bank runs and the resulting bank crashes that had caused the rapid fall into depression following the Stock Market crash as investors rushed to banks to try to get their savings out (some to try to repay their margin loans to Stock Brokers, some just to get money to live on).

The new FDIC could close a bank that was having trouble before a bank run began, preventing total loss of cash assets and try to reorganize the bank. If necessary the FDIC could pay off the customer's insured deposit accounts or force the sale of the failed bank to a more viable one (transferring the customer's accounts).

This was expected to help stabilize the economy of the US.