2009-02-28 — ml-implode.com
FDIC insurance creates terribly perverse incentives. GMAC is insolvent. It continues to exist only because taxpayers pumped $6 billion into the company at the end of December. In order to survive, GMAC is offering CD rates 80 bps above the national average. It’s a desperation move, common of banks nearing their end.
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Heavily-regulated private deposit insurance makes much more sense. As noted above, deposit insurance is a good thing if it helps to protect the unsophisticated and to stabilize the banking system. But if folks who take risk wish to be protected from it, they should be the ones to pay for the protection.
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Comments:
tvsterling at 04:39 2009-03-02 said:
The only surviving lesson from the Great Depression is that massive bank runs must be avoided at all costs. The only reason we are not in a mega depression right now is FDIC preventing that type of run. The system has been reformed. Now reckless banks pay much more for coverage. Scrapping the safety net is not an option. A stronger nip in the heels of reckless banks & better regulation is what's in order. Permalinkcatherine at 22:55 2009-03-02 said:
FDIC is broke and 300 insolvent banks should disappear by May, there will be runs and sooner than later you will get your funds back but the catch will be they will be government IOUs remember if your tax refund can legally be a worthless california IOU, what stops them with your bank account get cash and get it fast remember we have nationalized our banking system and on our way to nationalizing our insurance, housing, automobile and builders when we become completely socialist, YOU ONLY NEED ONE OF EACH COMPANY obamanation - is it what you thought it was going to be? Permalinkadd a comment | go to forum thread
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