Question

When the bank is about to collapse, what action may the FDIC take?

1) The FDIC may currently seize the bank
2) Up to $10,000 can be paid to shareholders
3) Up to $10,000 can be paid to depositors
4) The FDIC may publicly seize the bank

Answer 1

The FDIC may seize a failing bank to protect depositors, who are insured up to $250,000 per account. Shareholders are not protected by the FDIC.

Step-by-step explanation:

When a bank is about to collapse, the Federal Deposit Insurance Corporation (FDIC) may intervene to protect depositors. One action the FDIC may take is to seize the bank. This is typically done privately, to protect the bank's customers and prevent a panic.

It's important to note that the FDIC insures depositors up to $250,000 per account, and this guarantee is what helps to maintain confidence in the banking system and prevent bank runs. Shareholders are generally not insured by the FDIC and thus do not receive such protection when a bank collapses. The FDIC's involvement aims to ensure stability in the financial system and prevent loss for insured depositors.