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> But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money a
by ggchappell 18y ago
> But to say he doesn't rely on government help makes it sound like he runs a normal corporation. Banks are not normal corporations. Mine can't loan out money at 26 times my deposits. Can yours?
You might have a point there. I guess the question (regarding whether my point was valid) is whether federal deposit insurance is underpriced. I suppose there is a good chance that it is.
- jibiki 18y agoIt's the kind of thing that can't be priced (as AIG found out.) The distribution of the default rate is unknown and unknowable (fat tails and black swans and so on.) Also, if you increased the price of FDIC insurance, banks would need to make greater interest rates, and therefore would need to make riskier loans. You could make FDIC insurance contingent on taking less risk, but that sort of regulation always seems to backfire. (Of course we already have such regulation, the article even alludes to it. But increasing the strictness of risk-taking regulation would just solidify the major players.)