Several months ago I prepared an unusually lengthy report on deposit insurance reform (Vol. 2000-8: "Reflections on Deposit Insurance Reform; What It May Mean and Why"). I will not review or summarize that report here and will make only occasional reference to it, but we would be happy to make copies available to readers, at no cost. Frankly, my first thought on reading of the Administration’s intention was that a new chairman would be joining the FDIC almost precisely 50 years after I had joined the same Corporation as a newly-minted financial economist. Of course this led me to think of the FDIC as it was a half century ago, and how much it has since changed. This, in turn, prompted the present report.

In 1950 the FDIC had been in full operation for only about 16 years, and many of its "founding" officials were still there. The new Corporation’s culture, along with its attitude towards banks, bankers, and other regulatory agencies, had been shaped by the Great Depression of the early 1930s, and even more importantly by the fact that the new players had successfully organized and managed an institution that many persons believed would quickly suffer the same fate as the deposit insurance systems organized in eight states between 1908 and 1917, all of which had closed by 1930 or well before. The FDIC has had a much different history and I have often thought that a better understanding of the early days of the new deposit insurance system, as well as the reasons why it later changed in significant ways, could be useful, particularly now that reform is under discussion. Over the years friends occasionally have suggested that I try my hand at this, I suppose because so few persons remain who can speak with much if any recollection or knowledge of the early days of federal deposit insurance. This seems to be an appropriate time. If it is not, I am sure to hear about it from readers.

The first section (I) consists largely of personal recollections. As I describe a bit later, the FDIC was a very small organization when I joined it (and also when I left it almost ten years later). I was one of only two or three economists in the entire Division of Research and Statistics and one of my assignments, in the beginning and until I left, was to assemble the FDIC’s Annual Report and do much of the writing. This meant that for several months in each year I was spending a great deal of time talking to people in all parts of the agency. That assignment, along with an increasing amount of work done on legislative matters, and even a brief early tour as a bank examiner, does not necessarily make me the best observer of the FDIC for this period, but I at least I had the opportunity to view it from a variety of vantage points, and to talk at some length with many of the "founders."

Section II describes the changes that took place in the FDIC after the 1950s and particularly during the 1970s and 1980s. The underlying reasons are well known and will simply be noted. They include, most obviously, several significant pieces of legislation: the Bank Merger Act of 1966, the large number of Acts that dealt with consumer interests, including the Community Reinvestment Act, and the many deregulation Acts of the 1970s and 1980s. I will not describe or explore these Acts, or related economic developments, but simply make some observations on their effect on the FDIC and their possible relevance to deposit insurance reform. Finally, Section III wraps up by suggesting a few conclusions or lessons that might be drawn from this mini-history.