<p>FDIC is government institution, so it can only fail if <a href="https://www.fdic.gov/resources/deposit-insurance/faq/index.html" rel="nofollow noreferrer">government itself lacks the funds</a>.</p>
<p>Fed (unlike other central banks) does not have power to print new money. If the government would like to print more money it will be done by the <a href="https://www.bep.gov/" rel="nofollow noreferrer">Bureau of Engraving &amp; Printing</a> that is officially part of the Treasury. Fed could help by creating more money digitally by buying government bonds, which also creates new money but it can't literally print them.</p>
<p>In case government runs out of funds, Fed could create more money by buying up US bonds or Treasury could order BEP to print more money. However, even though government does not need to ever default on nominal obligations, <a href="https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises" rel="nofollow noreferrer">historically</a> governments often choose to (at least partially) default to avoid negative consequences of excess money creation.</p>
<p>Hence, what would happen is that either government would raise more money through monetary financing to avoid default, or government would decide that it is not worth the consequences of monetary financing and will just default on its FDIC obligations.</p>

CC BY-SA 4.0
2022-09-17T11:46:17.640Z
Does your answer implies that the FDIC insured deposits are more risky than t-bonds? This is because the government are legally obliged to honor the t-bond, but the government can decide to default on FDIC obligations.
dodo
CC BY-SA 4.0
2022-09-17T12:00:10.427Z
@dodo government is not obliged to honor any debt. US government could unilaterally decide it will never pay the money for their T-bills and no amount of suing would help. As a regular person government can always declare a bankruptcy.
1muflon1
CC BY-SA 4.0
2022-09-17T12:02:04.903Z
Hi, is it true that the government cannot default on t-bill unless it declaims bankruptcy, but a government can default on FDIC without bankruptcy?
dodo
CC BY-SA 4.0
2022-09-17T13:00:27.137Z
@dodo I don’t know details of public bankruptcy law. That is a law question not econ one. However, I know government can also just default partially (eg Greece few years back)  I am not sure how is it determined what debt is defaulted on in that case. You should ask these legal details on some law site
1muflon1
CC BY-SA 4.0
2022-09-17T09:20:33.537Z
2022-09-17T11:24:01.717Z
2022-09-17T11:24:01.717Z
1muflon1
<p>I understand that the <a href="https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation" rel="nofollow noreferrer">Federal Deposit Insurance Corporation</a> (FDIC) failing is unlikely, but the probability of such a failure is still positive. In case the FDIC fails, who covers the customers' losses? Will the Federal Reserve surely step in to print money to cover FDIC's ass?</p>

<banking><central-banking><risk><insurance>
Who insures the FDIC in case it fails?
dodo
# Who insures the FDIC in case it fails?

(Asked by: username_0 on 2022-09-17)

I understand that the [Federal Deposit Insurance Corporation](https://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation) (FDIC) failing is unlikely, but the probability of such a failure is still positive. In case the FDIC fails, who covers the customers' losses? Will the Federal Reserve surely step in to print money to cover FDIC's ass?

**Tags:** banking, central-banking, risk, insurance

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## 1 answers

### Answer by username_1 on 2022-09-17. Score: 1 | Accepted answer

FDIC is government institution, so it can only fail if [government itself lacks the funds](https://www.fdic.gov/resources/deposit-insurance/faq/index.html).

Fed (unlike other central banks) does not have power to print new money. If the government would like to print more money it will be done by the [Bureau of Engraving & Printing](https://www.bep.gov/) that is officially part of the Treasury. Fed could help by creating more money digitally by buying government bonds, which also creates new money but it can't literally print them.

In case government runs out of funds, Fed could create more money by buying up US bonds or Treasury could order BEP to print more money. However, even though government does not need to ever default on nominal obligations, [historically](https://en.wikipedia.org/wiki/List_of_sovereign_debt_crises) governments often choose to (at least partially) default to avoid negative consequences of excess money creation.

Hence, what would happen is that either government would raise more money through monetary financing to avoid default, or government would decide that it is not worth the consequences of monetary financing and will just default on its FDIC obligations.

> **Comments:**
> **username_0**: Does your answer implies that the FDIC insured deposits are more risky than t-bonds? This is because the government are legally obliged to honor the t-bond, but the government can decide to default on FDIC obligations.  
> **username_1**: @dodo government is not obliged to honor any debt. US government could unilaterally decide it will never pay the money for their T-bills and no amount of suing would help. As a regular person government can always declare a bankruptcy.  
> **username_0**: Hi, is it true that the government cannot default on t-bill unless it declaims bankruptcy, but a government can default on FDIC without bankruptcy?  
> **username_1**: @dodo I don’t know details of public bankruptcy law. That is a law question not econ one. However, I know government can also just default partially (eg Greece few years back)  I am not sure how is it determined what debt is defaulted on in that case. You should ask these legal details on some law site  

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