Question

Discount loans are no longer needed because the presence of FDIC eliminates the possibility of bank panics. True or False?

Answer 1

False. While the presence of the FDIC helps protect depositors' accounts and prevent bank runs, it does not eliminate the need for discount loans. Discount loans serve as a source of short-term funding for banks during times of liquidity shortages or financial crises.

Step-by-step explanation:

False. Discount loans are loans that are made at an interest rate below the prevailing market rate. They are typically offered by central banks to commercial banks. While the presence of the FDIC (Federal Deposit Insurance Corporation) helps protect depositors' accounts and prevent bank runs, it does not eliminate the need for discount loans. Discount loans serve as a source of short-term funding for banks during times of liquidity shortages or financial crises. The FDIC focuses on deposit insurance and bank supervision, whereas discount loans provide a different type of support to banks.