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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: bart13 who wrote (70889)10/3/2006 9:30:19 PM
From: Wyätt Gwyön  Read Replies (2) of 110194
 
like any complex system, i think one can make arguments either way--it's not totally cut and dried.

but when you consider how clueless the average person is regarding finances, it is unreasonable to expect ordinary people to know which banks are "good" and which aren't.

that isn't my attempt at moralizing; it's reality. if you don't have protection for depositors, they will "take the money and run". you end up with situations like Japan, where there are bank runs and people keep safes in their houses with hundreds of millions of yen in them. that's no way to run an advanced economy.

despite all their bank runs, the Japanese have for many years wished they could achieve something like the RTC in the US in cleaning up the failed S&Ls.

there are a lot of social ills that result from that situation, and they can be worse than the occasional bailout (not that bailouts should be viewed with complacency).

my feeling is the govt should offer insurance, but in exchange for this insurance it has the right (indeed, the obligation) to strictly regulate member banks. the failure of the govt to do so is a failure of leadership, but i don't think it means insurance per se is a bad idea.
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