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I just posted this on mastodon but I think maybe the community here knows better: If you ran a bank that required insurance on all deposits over the $250k FDIC
by po 4y ago
I just posted this on mastodon but I think maybe the community here knows better:
If you ran a bank that required insurance on all deposits over the $250k FDIC coverage, and then offered 3rd-party insurance as a convenience for those who wanted it... your bank would be much less likely to suffer a blow up due to a bank run and therefore that insurance should be relatively cheap.
Furthermore, people should prefer to bank someplace where all of the depositors are covered. Why is this not commonplace? Simply because the additional fee discourages it?
I think if Yellen announced this as a requirement it would remove that incentive to treat FDIC like free unlimited insurance.
- ljf 4y agoWhich apartment block do you thing a most people would rather live in, the one that charges you an extra 10 percent a year but promises to replace all your belongings if it ever burns down, or one that tells you it will never burn down?
- barrkel 4y agoAnd FDIC insurance is more on the order of a couple of percent, varying depending on your investment structure.
- polygamous_bat 4y ago> Why is this not commonplace? Simply because the additional fee discourages it? You actually answer this question in the second half, because banks have been treating the government as free unlimited insurance.
- po 4y agoI guess all the more reason for Yellen to mandate it.