In my view, inconvenience aside, there needs to be a balance between amounts one would like to see insured by the FDIC and amounts that can reasonably be covered given the FDIC's resources. Increased FDIC premiums might allow for greater resources so as to increase the insurance limits, but the impact of such premia e.g., reduced interest rates on deposit vehicles, might drive customers to alternative financial institutions where funds are not insured.

The incentive for diversification, because it reduces risk exposure, is a good thing. The IndyMac experience highlights anew the point that is often ignored that the benefits of diversification outweigh the costs of inconvenience. Although from a personal perspective I very much hope that the terms of IndyMac's resolution will greatly limit, if not fully eliminate, the losses for the uninsured depositors, from an economic perspective it needs to be noted that moral hazard, that would arise from a situation in which a failure to diversify is wholly compensated, might have adverse consequences of its own.

Furthermore, if there is sufficient demand in the future for let's say a premium bank deposit insurance vehicle that would cover amounts beyond FDIC limits, one might witness insurance companies developing and marketing such vehicles on a wider basis. The key questions would concern risk exposure for the insurance companies, whether a sufficient number of people would be willing to purchase such coverage at rates that would enable the insurance companies to earn a profit.

Moreover, in the wake of the implosion of the recent housing bubble, regulators might do well to limit the share of any bank's loan portfolio that can be comprised by any single loan category e.g., real-estate-based (commerical, residential, and mortgage-backed securities), etc. Experience following the S&L crisis of the 1980s and the evolving post-real estate bubble banking challenges might well provide some reasonable understanding as to constraints that would provide better protection in a statistically significant fashion.

A gradual and modest increase in reserve requirements might also help ensure that financial institutions are better capitalized.

Sharply tightened standards that substantially reduce the practice of maintaining significant off-balance sheet vehicles and requirements that items be based at the lower of face value or market (not model) value with a sizable "haircut" for illiquid items, could also create better transparency and bring about much improved risk management.