Museum of American Finance's Blog

The Federal Deposit Insurance Corporation (FDIC) has been the government agency responsible for providing deposit insurance to banks since its creation in the Glass-Steagall Act of 1933. While the establishment of the FDIC was an important event in the history of government regulation of the economy, it was not the first instance of deposit insurance in the United States. Several states had previously had state level institutions of deposit insurance in the 1800s and early 1900s.

President Franklin D. Roosevelt signing the Banking Act of 1933 (Glass-Steagall Act), which established the FDIC.

At various times before the Civil War, Vermont, Michigan, Indiana, and New York insured both banknotes and deposits, while Iowa and Ohio insured only banknotes. Most of these systems operated successfully up to the Civil War, with the notable exception of Michigan’s which had been established immediately before the Panic of 1837 and had failed rather quickly. These state deposit insurance systems generally required participating banks (and participation was voluntary) to pay for insurance to pay off deposit returns from failed banks.

Such systems did not survive the Civil War and nationalization of the banking system. However, interest in state level deposit insurance systems was increasing again by the end of the 1800s, though it was not until 1907 that Oklahoma became the first state since the Civil War to establish a state deposit insurance system. Seven more states followed suit in the following ten years. The deposit insurance systems of the early 20th century had less positive results and unintended consequences. A common observation of banks insured by state deposit insurance in the 1920s was that in spite of nominal regulations against risky behavior by banks, the state deposit insurance actually encouraged risky behavior by banks, increasing the proportion of bank failures and thus insurance burden. By the end of the 1920s the state deposit insurance schemes had largely failed. In some states voluntary participation left banks the option to simply opt out, and most did, while in other states high insurance costs led to deposit insurance being repealed. Yet while state level deposit insurance appeared to be a failure, it was a model that would pave the way for the establishment of the FDIC, deposit insurance on the federal level and subject to stricter regulation.

Vaughn Rennie  is a summer museum intern at the Museum of American Finance.

The Federal Reserve Bank of New York

As Senior Museum Interns, we get the opportunity to participate in out-of-office learning experiences once a week.  We have been given the privilege visiting some of the most important financial institutions located in the New York area.  Thus far, these sites have included the Federal Reserve Bank of New York and the New York Mercantile Exchange.  Visiting the Federal Reserve, located a short walk from the museum, presented a once-in-a-lifetime opportunity.  The Bank takes part in more transactions than any other bank in the United States Federal Reserve System.  At the building, security kept a watchful on us, and they informed us that security officers have their own private shooting range on the premises for target practice.  This might seem extreme, but remember that the bank houses over 300 billion dollars worth of gold.  The museum portion of the building featured many interesting exhibits, including the most valuable US coin in existence.  They even allowed us a chance to visit the gold vault on the tour.  Located several floors underground, the gold vault holds the gold reserves of many foreign nations and multi-national corporations.

Our next visit was to the New York Mercantile Exchange. The tour took us straight to the observation deck located right above the trading floor.  From this vantage point, we saw the entire trading floor, and observed the controlled chaos transpiring below on the exchange.  The guides at the New York Mercantile Exchange took us to the trading floor, and allowed us to walk among the traders as they conducted business.  We saw the “pits” where different commodities, such as gold and silver, trade amongst buyers and sellers.  Each pit contained traders communicating to each other, computer screens, and terminals with telephones.  The guide informed us that the number of people who work on the trading floors has decreased over the last decade.  Automation and digitalization resulted in a decreased demand for human traders on the floor as more and more trades now take place electronically.  The guide continued by saying that he thinks the trading floor would always be a necessity, because of the resources the building offers and the need for face-a-face interaction when making deals.

Interning at the Museum of American Finance has been a great experience. While most summer internships for college students consist of tedious letter filing and coffee runs, we learn first-hand what it takes to run a non-profit museum in the financial capital of the world.  In addition to archiving, guiding tours and utilizing social media outlets such as Twitter and Flickr, we take weekly trips to local partner institutions.  The interns here have interests across a range of areas including American history, finance and the visual arts.

One of the better aspects of the internship is that there is a rotational schedule; we spend two weeks on each project, be it visitor services, archiving, social media or educational development. This system allows for collaboration between interns and establishes a sense of community in the office.

Despite the freezing temperatures in the library and the archive room, working in the archiving department provides us with a rare inside look into the collections that have been generously donated over the years to the Museum.  Sifting through old banknotes, bonds, magazines, stock certificates and photographs, interns quickly learn about the nation’s rich financial history. Archiving has also showed us the process of preserving the collections and its importance in helping to maintain objects in their original state.

Everybody looks forward to Thursdays, which is field-trip day. So far, we have been fortunate enough to visit the Federal Reserve Bank, the New York Stock Exchange and the New York Mercantile Exchange. Along with these important financial institutions, we have visited other museums such as the Skyscraper Museum, the National Museum of the American Indian and the New York Public Library. Visiting the museums has given us the chance to see how other institutions maintain and present their collections and exhibits. We found that the NYPL, in particular, had a wide range of collections and a great layout to its exhibits.  It has been both helpful and interesting to compare and contrast the MoAF with other museums.

The upcoming “Race Around Wall Street” scavenger hunt has been a joint project amongst the interns, and is essentially an amalgamation of the different rotations; researching and assembling this event has involved all of the skills and knowledge the interns gained from their various roles at the Museum. We’ve marked key sites around the Financial District, and, using the financial and historical knowledge acquired from walking tours and field trips, generated sets of challenging clues for the competitors.  The skills gained from the interns’ social media rotation have been most beneficial, as we have used Twitter, Facebook and Museum mailing lists to advertise our events.

Our work is made even more enjoyable because of the friendly community atmosphere of the Museum. The staff at the Museum is unbelievably accommodating and open to all of our questions and concerns; rather than regarding interns as lowly grunt men or hassles, the staffers have made a concerted effort to include the interns in staff discussions and traditions such as Free Lunch Friday.  Such a warm community makes the unpaid work bearable!  A small staff ensures that everyone at the Museum gets to know each other, and even employees and interns that leave the Museum come back to visit.