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The FDIC means that banks no longer need to care about solvency. It's not the market doing that, it's government interference.
by skookumchuck 9y ago
The FDIC means that banks no longer need to care about solvency. It's not the market doing that, it's government interference.
- maxxxxx 9y agoThe FDIC could seize banks (don't they?) and still protect deposits up to the 250k limit. They could also require claw-back clauses for banks that want FDIC protection. Without the FDIC the first thing banks would have done in 2008 would have been to drop the savings accounts of a lot of regular people. It plays an important role for the average citizen.
- skookumchuck 9y ago> Without the FDIC the first thing banks would have done in 2008 would have been to drop the savings accounts of a lot of regular people. Banks go out of business if they get a reputation for defaulting on depositors' accounts. After all, would you deposit money in such a bank? I wouldn't, either. Depositors would still have legal recourse against the bank, too.
- pjc50 9y agoOddly, the only banks this happened to were in Cyprus and are still in business.
- skookumchuck 9y agoAre you a current customer of those banks? I'm not, either.
- jazzyk 9y agoThey did not default - there was a 10% haircut on accounts > 100K. The haircut was possible only because most of the > 100K accounts were held by rich (mostly shady) Russians.