American Institute of Certified Planners (AICP) Practice Exam

What was established by the National Housing Act in 1934 to insure savings deposits?

1. Federal Savings and Loan Insurance Corporation

2. The Federal Home Loan Bank

3. Federal Housing Administration

4. Department of Housing and Urban Development

The correct answer is: Federal Savings and Loan Insurance Corporation

The Federal Savings and Loan Insurance Corporation (FSLIC) was established by the National Housing Act of 1934 as a result of the economic turmoil during the Great Depression. Its primary function was to insure savings deposits in member savings and loan associations, which helped restore public confidence in the financial system. By providing insurance coverage on deposits, the FSLIC played a crucial role in protecting depositors' funds and promoting stability within the banking system. This initiative was part of a broader legislative effort to improve housing finance in America, offering consumers the assurance that their savings would be secure, thereby encouraging more individuals to deposit their money into savings and loans, which could then be used to finance housing. This action was critical at a time when many were wary of banks and financial institutions due to widespread bank failures. In contrast, the other entities listed did not focus specifically on insuring savings deposits. The Federal Home Loan Bank system, established shortly after the FSLIC, aimed to provide liquidity to lenders and support housing finance but did not provide deposit insurance. The Federal Housing Administration (FHA), created concurrently, focused on improving housing standards and expanding access to mortgage insurance but was not directly tied to the insurance of savings deposits. The Department of Housing and Urban Development (