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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (100873)	8/15/2009 2:19:36 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 116555

Let's explore the success of the FDIC in bank failure prevention I can tell you myself that I would be very nervous about keeping money in a bank without FDIC insurance, even with your 100% reserves. Why? Because it would be very easy for those reserves to disappear down a financial rat hole in the event of a bank failure. A bank that is effectively "self-insured" by keeping 100% reserves for checking deposits does nothing for savings deposits and CDs. And btw, if a bank had to keep 100% reserves for all of it's deposits, what money would they have to loan out? So yeah.. the FDIC doesn't do a very good job of preventing bank failures, but they do a HELL OF A JOB in making depositors feel secure enough not to panic and create even more of them. But preventing bank failures is supposed to be the job of the Federal Reserve. That's why I say the FDIC needs some teeth that permits it to encroach upon the Fed's traditional authority. Btw.. I understand where you're coming from, although I think it would be a recipe for exacerbating deflation and the credit crunch. And it would do very little to prevent panic-stricken bank runs. Hawk