2020: The FDIC is a very good thing that came out of the Great Depression.
WARREN BUFFETT: One of the things, as I look back on that period is — and I don’t think economists, generally, like to give it that much of a point of importance, but — but if we’d had the FDIC 10 years earlier, we’d — the FDIC started on January 1st, 1934 — it was part of the sweeping legislation that took place when (President Franklin) Roosevelt came in — but if we’d had the FDIC, we would have had a much, much different experience, I believe, in the — in the Great Depression.
People blame it on smooth — Smoot-Hawley. I mean, they — there’s all kinds of things — and the margin requirements in ’29 — and all of those things entered into creating a recession.
But if you have over 4000 banks fail, that’s 4000 local experiences where people save and save and save, put their money away and then someday, they reach for it and it’s gone.
And that happens, you know, in all 48 states. And it happens to your neighbors and it happens to your relatives. It — it has to have an effect on the psyche that’s incredible.
So, one very, very, very good thing that came out of the depression, in my view, is the FDIC. And it would have been a somewhat different world, I’m sure, if the bank failures hadn’t just rolled across this country and — and with people that thought that they were savers find out that they had nothing when they went there and there was a sign that said “Closed.”
Incidentally, the FDIC — I think very few people know this — but — or at least they don’t appreciate it — but the FDIC does not cost the American taxpayer a dime. I mean, its expenses have been paid, its losses have been paid, all through assessments on banks. It’s been a mutual insurance company of the banks, backed by the federal government, and associated with the federal government.
But now it holds a hundred billion dollars and that consists of premiums that were paid in, and investment income on the premiums, less the expenses and paying of all the losses. And think of the incredible amount of peace of mind that’s given to people that were not similarly situated in — when the Great Depression hit.