ABSTRACT
Federal deposit insurance for commerdal banks and fluHt institutions was authorized in the 1930s after decades of debate and experirnentation with state programs. The success of these funds in restoring confidence in depository institutions after the wave of bank failures in the early years of the Depression was seen by economists as the "most irnportant structural change in the banking system" and a fundamental contribution to U.S. monetary and finandal stability.l The growing perception of deposit insurance as the comerstone of finandal stability and its record in providing protection at minimal cost led to the creation in 1970 of federal insurance funds for securities firms and credit unions and to state guaranty funds for insurance companies.
