Reconstruction Finance Corporation (RFC), independent agency of the United States government, created during the economic depression by congressional enactment in 1932, and abolished by Congress in June 1957. The stated purpose of the RFC was “to provide emergency financing facilities for financial institutions; to aid in financing agriculture, commerce, and industry; to purchase preferred stock, capital notes, or debentures of banks and trust companies; and to make loans and allocations of its funds as prescribed by law.” These purposes were subsequently enlarged by legislative amendment to include participation in the maintenance of the economic stability of the country through the promotion of maximum production and employment and the encouragement of small business enterprises. The basic activities of the RFC were to make and collect loans and to buy and sell securities. Originally, the capital stock of the corporation was fixed at $500 million.
For seven years following its creation, the RFC was classified as an emergency agency. In 1939 it was grouped with other agencies to constitute the Federal Loan Agency. It was transferred to the Department of Commerce in 1942 and reverted to the Federal Loan Agency three years later. When that agency was abolished in 1947, its functions were assumed by the RFC.
Approximately two-thirds of the disbursements of the RFC were made in connection with the national defense of the U.S., especially during World War II. Loans were also made by the RFC to federal agencies and to state and local governments in connection with the relief of the unemployed and the relief of victims of disasters such as floods and earthquakes. Disbursements to private enterprises included loans to banks and trust companies to aid in their establishment, reorganization, or liquidation, and to mortgage-loan companies, building and loan associations, and insurance companies. Loans were also made to agricultural financing institutions, to enterprises engaged in financing the export of agricultural surpluses, and to railroads, mines, mills, and other industrial enterprises. Hundreds of millions of dollars were disbursed by the RFC for the purchase of securities offered by the Public Works Administration, other government agencies, and private corporations.
In 1948, after the financial crisis of the depression and World War II had passed, Congress reduced the capital stock of the RFC to $100 million and provided for the retirement of the outstanding capital stock in excess of that amount. It also authorized the RFC to issue to the Treasury its own notes, debentures, bonds, or other similar obligations, in the amount of its outstanding loans, in order to borrow money with which to carry on its functions.
During 1951 and 1952 congressional investigators found considerable evidence of fraud and corruption among RFC officials. In July 1953, Congress enacted the RFC Liquidation Act, providing for the gradual transfer of the functions of the RFC to other government agencies. The RFC loan powers were transferred in 1954 to the Small Business Administration. The RFC was abolished in June 1957, and its remaining functions were transferred to the Housing and Home Finance Agency, the General Services Administration, and the Department of the Treasury. During its existence from 1932 to 1957, the RFC disbursed more than $50 billion in loans.
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
Tuesday, November 11, 2008
THE IMPORTANCE OF INSURANCE
Insurance benefits society by allowing individuals to share the risks faced by many people. But it also serves many other important economic and societal functions. Because insurance is available and affordable, banks can make loans with the assurance that the loan’s collateral (property that can be taken as payment if a loan goes unpaid) is covered against damage. This increased availability of credit helps people buy homes and cars. Insurance also provides the capital that communities need to quickly rebuild and recover economically from natural disasters, such as tornadoes or hurricanes.
Insurance itself has become a significant economic force in most industrialized countries. Employers buy insurance to cover their employees against work-related injuries and health problems. Businesses also insure their property, including technology used in production, against damage and theft. Because it makes business operations safer, insurance encourages businesses to make economic transactions, which benefits the economies of countries. In addition, millions of people work for insurance companies and related businesses. In 1996 more than 2.4 million people worked in the insurance industry in the United States and Canada.
Insurance companies perform a type of monetary redistribution—they collect premiums and eventually redistribute that money as payments. Depending on the type of insurance, redistribution can take anywhere from a few months to many decades. Because of this delay between collecting and paying out funds, insurance companies invest their funds to bring in extra revenues. Such investments help businesses and governments finance their operations, and profits from those investments support the operations of insurance companies. With these investment earnings, insurance companies can keep rates much lower than would otherwise be possible.
Not all effects of insurance are positive ones. The possibility of earning insurance payments motivates some people to attempt to cause damage or losses. Without the possibility of collecting insurance benefits, for instance, no one would think of arson, the willful destruction of property by fire, as a potential source of money.
Insurance itself has become a significant economic force in most industrialized countries. Employers buy insurance to cover their employees against work-related injuries and health problems. Businesses also insure their property, including technology used in production, against damage and theft. Because it makes business operations safer, insurance encourages businesses to make economic transactions, which benefits the economies of countries. In addition, millions of people work for insurance companies and related businesses. In 1996 more than 2.4 million people worked in the insurance industry in the United States and Canada.
Insurance companies perform a type of monetary redistribution—they collect premiums and eventually redistribute that money as payments. Depending on the type of insurance, redistribution can take anywhere from a few months to many decades. Because of this delay between collecting and paying out funds, insurance companies invest their funds to bring in extra revenues. Such investments help businesses and governments finance their operations, and profits from those investments support the operations of insurance companies. With these investment earnings, insurance companies can keep rates much lower than would otherwise be possible.
Not all effects of insurance are positive ones. The possibility of earning insurance payments motivates some people to attempt to cause damage or losses. Without the possibility of collecting insurance benefits, for instance, no one would think of arson, the willful destruction of property by fire, as a potential source of money.
National Insurance
National Insurance, payments made by employers and employees in the United Kingdom to fund state benefits, such as unemployment pay and pensions. The money goes into a separate fund and technically is not part of central government revenue. National insurance has some of the characteristics of a tax, although the payments employers and employees make are referred to as “contributions.” The distinction made by William Beveridge (the national insurance system set up in 1946 implemented proposals of the Beveridge Report) was “that taxation is or should be related to assumed capacity to pay rather than to the value of what the payer may expect to receive, while insurance contributions are or should be related to the value of the benefits and not to the capacity to pay.”
National insurance contributions are based on earnings. The percentage of earnings paid by employees is different from that paid by employers, and that paid by self-employed workers. Those earning below a certain amount do not have to pay any national insurance and those earning more than a certain amount do not pay national insurance on earnings above that amount. In the case of someone earning just under £23,000 (the national insurance ceiling, equivalent to about $36,300 in United States currency), the employee’s total national insurance contribution is currently set at just over £2,000, which is about 9 percent of earnings, and the employer’s contribution is higher (equivalent to slightly more than 10 percent of earnings). However, for those earning up to about £10,660, the employer’s contribution ranges from 3 to 7 percent.
Many countries operate similar systems, in which there is a distinction between taxes that finance such things as public sector wages, and compulsory social insurance that finances welfare benefits.
National insurance contributions are based on earnings. The percentage of earnings paid by employees is different from that paid by employers, and that paid by self-employed workers. Those earning below a certain amount do not have to pay any national insurance and those earning more than a certain amount do not pay national insurance on earnings above that amount. In the case of someone earning just under £23,000 (the national insurance ceiling, equivalent to about $36,300 in United States currency), the employee’s total national insurance contribution is currently set at just over £2,000, which is about 9 percent of earnings, and the employer’s contribution is higher (equivalent to slightly more than 10 percent of earnings). However, for those earning up to about £10,660, the employer’s contribution ranges from 3 to 7 percent.
Many countries operate similar systems, in which there is a distinction between taxes that finance such things as public sector wages, and compulsory social insurance that finances welfare benefits.
Federal Home Loan Bank Board
Federal Home Loan Bank Board, former independent agency of the U.S. government established, with its related units, in the 1932-1934 period to encourage thrift and economical home financing. The board set policies, issued regulations, and supervised the operations of the following units: the Federal Home Loan Bank System, which constituted a network of reserve credit for savings and home-financing institutions served by 12 regional Federal Home Loan banks; the Federal Savings and Loan Insurance Corp. (FSLIC), which insured the accounts of depositors in insured savings and loan associations and similar institutions; and the Federal Home Loan Mortgage Corp., created by the Emergency Home Finance Act of 1970 to operate a secondary mortgage market.
Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Office of Thrift Supervision, a newly created bureau within the Department of the Treasury, assumed the board's regulatory responsibilities, while the Savings Association Insurance Fund (SAIF), administered by the Federal Deposit Insurance Corp. (FDIC), replaced the FSLIC.
The board is administered by three members appointed to 4-year terms by the president and confirmed by the Senate. The chairperson is designated by the president.
Under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, the Office of Thrift Supervision, a newly created bureau within the Department of the Treasury, assumed the board's regulatory responsibilities, while the Savings Association Insurance Fund (SAIF), administered by the Federal Deposit Insurance Corp. (FDIC), replaced the FSLIC.
The board is administered by three members appointed to 4-year terms by the president and confirmed by the Senate. The chairperson is designated by the president.
Federal Deposit Insurance Corporation (FDIC)
Federal Deposit Insurance Corporation (FDIC), independent agency of the United States government created in 1933 under a section of the Federal Reserve Act to insure deposits in banks in the event of bank failure. In 1950 the section of the act concerning the corporation was amended and made a separate law, the Federal Deposit Insurance Act. The act provides up to $100,000 insurance for each depositor in an insured bank. A new set of amendments to the act, which went into effect in April 2006, provides insurance up to $250,000 on individual retirement accounts (IRAs) held at banks and savings associations insured by the FDIC and at credit unions insured by the National Credit Union Administration (NCUA).
All banks that meet the standards for membership in the Federal Reserve System automatically become insured by the corporation; included are national banks chartered by the comptroller of the currency under federal law and state-chartered banks that obtain membership in the system. State-chartered banks, including mutual savings institutions that are not members, may become insured if they meet the prescribed qualifications for insurance.
In 1989 the Financial Institutions Reform, Recovery, and Enforcement Act abolished the Federal Savings and Loan Insurance Corp. (FSLIC) and transferred its functions to the FDIC. The FDIC now administers two separate deposit insurance funds: the Bank Insurance Fund for commercial banks and the Savings Association Insurance Fund for thrift institutions formerly insured by FSLIC.
The major functions of the corporation are to pay the depositors if an insured bank closes without adequate resources to pay claims of its depositors; to act as receiver for all suspended national banks and for suspended state banks if state authorities so request; and to prevent the development or continuance of unsound banking practices. The corporation may also make loans to or purchase assets from insured banks to facilitate a merger or consolidation if such action will prevent or reduce loss to the corporation or if the continued operation of a distressed bank is deemed essential to provide adequate banking services in a community. The corporation also regularly examines insured banks that are not members of the Federal Reserve System and prescribes rules governing the payment and advertising of interest on deposits.
The most recent changes to the Federal Deposit Insurance Act raised the insurance amount from $100,000 to $250,000 for an IRA account and for other types of retirement accounts. Other types of accounts are self-directed Keogh accounts, “457 Plan” retirement accounts used by state government employees, and self-directed 401(k) accounts (see Retirement Plans). All IRA accounts were covered by these changes, including traditional and Roth IRAs. These changes went into effect on April 1, 2006. Under the new rules, all deposits at the same FDIC-insured bank or NCUA-insured credit union that are held in these types of retirement accounts are insured up to $250,000. This amount is separate from other deposit accounts held at the same institution, which are still insured up to $100,000.
The IRAs must be invested in bank deposits, such as certificates of deposit (CDs). The FDIC does not insure mutual funds, stocks, bonds, or annuities sold through banks or savings associations.
The new changes also established a method for considering increases in insurance limits on all deposit accounts. Beginning in 2011, the FDIC will consider raising insurance limits every five years. The considerations will be based, in part, on the rate of inflation.
The FDIC is managed by a five-member board of directors. All are appointed by the president and confirmed by the Senate. No more than three can be from the same political party. The FDIC is headquartered in Washington, D.C., and has six regional and field offices around the country.
All banks that meet the standards for membership in the Federal Reserve System automatically become insured by the corporation; included are national banks chartered by the comptroller of the currency under federal law and state-chartered banks that obtain membership in the system. State-chartered banks, including mutual savings institutions that are not members, may become insured if they meet the prescribed qualifications for insurance.
In 1989 the Financial Institutions Reform, Recovery, and Enforcement Act abolished the Federal Savings and Loan Insurance Corp. (FSLIC) and transferred its functions to the FDIC. The FDIC now administers two separate deposit insurance funds: the Bank Insurance Fund for commercial banks and the Savings Association Insurance Fund for thrift institutions formerly insured by FSLIC.
The major functions of the corporation are to pay the depositors if an insured bank closes without adequate resources to pay claims of its depositors; to act as receiver for all suspended national banks and for suspended state banks if state authorities so request; and to prevent the development or continuance of unsound banking practices. The corporation may also make loans to or purchase assets from insured banks to facilitate a merger or consolidation if such action will prevent or reduce loss to the corporation or if the continued operation of a distressed bank is deemed essential to provide adequate banking services in a community. The corporation also regularly examines insured banks that are not members of the Federal Reserve System and prescribes rules governing the payment and advertising of interest on deposits.
The most recent changes to the Federal Deposit Insurance Act raised the insurance amount from $100,000 to $250,000 for an IRA account and for other types of retirement accounts. Other types of accounts are self-directed Keogh accounts, “457 Plan” retirement accounts used by state government employees, and self-directed 401(k) accounts (see Retirement Plans). All IRA accounts were covered by these changes, including traditional and Roth IRAs. These changes went into effect on April 1, 2006. Under the new rules, all deposits at the same FDIC-insured bank or NCUA-insured credit union that are held in these types of retirement accounts are insured up to $250,000. This amount is separate from other deposit accounts held at the same institution, which are still insured up to $100,000.
The IRAs must be invested in bank deposits, such as certificates of deposit (CDs). The FDIC does not insure mutual funds, stocks, bonds, or annuities sold through banks or savings associations.
The new changes also established a method for considering increases in insurance limits on all deposit accounts. Beginning in 2011, the FDIC will consider raising insurance limits every five years. The considerations will be based, in part, on the rate of inflation.
The FDIC is managed by a five-member board of directors. All are appointed by the president and confirmed by the Senate. No more than three can be from the same political party. The FDIC is headquartered in Washington, D.C., and has six regional and field offices around the country.
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