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Even if there were it wouldn’t obviate the need for orderly receiverships for banks. Operational risk is a common reason for holes in a banks balance sheet (eg
by kasey_junk 4y ago
Even if there were it wouldn’t obviate the need for orderly receiverships for banks. Operational risk is a common reason for holes in a banks balance sheet (eg fraud by a bank employee).
Deposit insurance is a useful tool to manage the orderly unraveling of a bank independent of how it goes bust.
- acover 4y agoThat makes sense, but how many US banks have failed due to fraud or error? Counting if deposits = money at the fed seems vastly easier managing loans that differ from your deposits.
- kasey_junk 4y agoWhen the fdic studied it they concluded 37% of failed banks had evidence of insider abuse or fraud[0]. They don’t state that the fraud caused the failure and perhaps fraud would be harder in a fully reserved bank, but the incidence level is high. [0] https://www.fdic.gov/analysis/cfr/2017/wp2017/cfr-wp2017-06.pdf https://www.fdic.gov/analysis/cfr/2017/wp2017/cfr-wp2017-06....