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Anyone caught in a bank run only has themselves to blame. It's their responsibility to not deposit their money in an over-leveraged bank. Unfortunately due to F

Anyone caught in a bank run only has themselves to blame. It's their responsibility to not deposit their money in an over-leveraged bank. Unfortunately due to FDIC insurance, consumers now spend more time researching the quality of the LCD monitors on the market, when deciding which one to buy, than the future financial solvency of banks, when deciding which one to trust their money to.

ISL 9y ago
It is not an unfortunate fact -- civilization moves forward when we increase the number of things we can do without thinking. FDIC, as the underwriter, has the power not to insure a manifestly poorly-run bank. Thus, the FDIC mark is a defacto sign that a bank can be trusted by a consumer. I would much rather have FDIC (or a system of robust private bank insurance) than need to vet each prospective bank's balance sheet, employees, and loans when choosing to open a personal checking account.
- thathappened 9y ago
  If you draw all of the system out you'll see it's no longer tangible and that's why FDIC allows for 99 years to make good on that promise. I think the math works out that inflation alone in a system that survives 99 years can recoup any system that collects an average of 30% recirculation
- CryptoPunk 9y ago
  Being responsible for yourself doesn't mean you don't delegate. It means you have to stay on top of who your delegate is. FDIC means you simply tax others when you screw up. The insurance premium has no relationship with your risk profile. Responding to below: >>Successfully rescuing a bank from a run is not only a benefit to society as a whole but often makes a small net profit. This is the free lunch fallacy used to justify involuntary income redistribution. If it were indeed profitable on average, the market would do the bailing out. Bailing out the irresponsible prevents the evolutionary process of weeding out reckless and incompetent business models and behavioural patterns from working, while unfairly burdening those who are competent in their management of capital, which inhibits the expansion of their influence.
  - pjc50 9y ago
    Successfully rescuing a bank from a run is not only a benefit to society as a whole but often makes a small net profit.
pjc50 9y ago
Really? Can you even predict these things in retrospect? What flags would you have found for Northern Rock or AIB, using only public information available at the time?

ISL 9y ago

It is not an unfortunate fact -- civilization moves forward when we increase the number of things we can do without thinking. FDIC, as the underwriter, has the power not to insure a manifestly poorly-run bank. Thus, the FDIC mark is a defacto sign that a bank can be trusted by a consumer. I would much rather have FDIC (or a system of robust private bank insurance) than need to vet each prospective bank's balance sheet, employees, and loans when choosing to open a personal checking account.

thathappened 9y ago
If you draw all of the system out you'll see it's no longer tangible and that's why FDIC allows for 99 years to make good on that promise. I think the math works out that inflation alone in a system that survives 99 years can recoup any system that collects an average of 30% recirculation
CryptoPunk 9y ago
Being responsible for yourself doesn't mean you don't delegate. It means you have to stay on top of who your delegate is. FDIC means you simply tax others when you screw up. The insurance premium has no relationship with your risk profile. Responding to below: >>Successfully rescuing a bank from a run is not only a benefit to society as a whole but often makes a small net profit. This is the free lunch fallacy used to justify involuntary income redistribution. If it were indeed profitable on average, the market would do the bailing out. Bailing out the irresponsible prevents the evolutionary process of weeding out reckless and incompetent business models and behavioural patterns from working, while unfairly burdening those who are competent in their management of capital, which inhibits the expansion of their influence.
- pjc50 9y ago
  Successfully rescuing a bank from a run is not only a benefit to society as a whole but often makes a small net profit.

pjc50 9y ago

Really? Can you even predict these things in retrospect? What flags would you have found for Northern Rock or AIB, using only public information available at the time?