What was Roosevelt's goal in creating the SEC and FDIC?

1 Answer
Feb 9, 2016

The SEC and FDIC were created to create stability in the US banking system for the average consumer.


During the 1920s, the stock market boomed. Money flowed in and out of the stock market much like a casino, and there were even small stock storefronts that opened up in New York, much like a modern betting parlor.

The 'bubble' that created in the US market came crashing down in 1929, and banks had put so much of their own assets into the market that they could no longer cover their depositors' funds. That created a 'run' on banks where people tried to pull out their life savings. Many could not, because the banks ran out of money.

Once FDR became President, he embarked on a program to reform the financial system to prevent a similar collapse. Two elements of that reform program (and there were several more) were the Securities and Exchange Commission (SEC) which regulates the sale of stocks and securities and the Federal Deposit Insurance Corporation (FDIC) which created an insurance fund, financed by premiums paid by Federal banks and administered by the Federal government, to cover small depositors so that they could rest assured their money was safe.

The result was renewed confidence in the financial system and a long period of economic stability in the US, lasting into the late 1990s.