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Time will tell. I suspect banks will be more reckless because of this. There’s less incentive to protect deposits if they are all guaranteed, and more incentive
by ghiculescu 4y ago
Time will tell. I suspect banks will be more reckless because of this. There’s less incentive to protect deposits if they are all guaranteed, and more incentive to make risky bets.
But it’s also a principled point. If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society.
- vkou 4y ago> I suspect banks will be more reckless because of this. Could you outline under what mechanism other banks will look at what happened to Signature and SVB, and conclude that they should engage in behavior that's likely to get them seized, and their equity zeroed out? > If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society. There was no rule that capped recoupable deposits at $250,000. There was simply a rule that guaranteed them up to $250,000. Also, if your rules result in puppies being regularly pushed into the puppy-shredder, and depositors routinely losing their money through no fault of their own, that's also a bad way to run a society. You know what's a good way to run a society? Retail banks being a boring, dumb, stable, reliable service.
- Rapzid 4y ago> If you believe that rules don’t matter as long as you like the outcome, that’s a bad way to run a society. What rules were broken? Tell us, what are the rules the FDIC operate under?