MaggieD
DP Veteran
- Joined
- Jul 9, 2010
- Messages
- 43,244
- Reaction score
- 44,664
- Location
- Chicago Area
- Gender
- Female
- Political Leaning
- Moderate
A confidence booster, exactly. And why would one need a confidence booster? Why not let banks fight among themselves over how best to keep customer confidence high about their services they offer? Competition, to put it another way. But no, instead, people don't think too much, nor care, about what the bank does with your money after you deposit it, because uncle sam promises that, no matter what, it'll be there when you want to take it back out. I want to open a business where I can put government backed guarantee on my product...
As it is, it is ONLY a confidence booster. As we saw at the beginning of the housing crisis, bank runs still ruin banks, regardless of the FDIC.
I get it. However, no bank can withstand a "run." When people got nervous, they went to their banks demanding their money. Well, guess what? Your money's not at your bank. It's been lent out (to within the reserve requirements set by the Federal government). The domino effect completely destroyed our banking system. We cannot ever afford for that to happen again; so....."Insured by the Full Faith & Credit of the United States Government."
Now. When banks make risky loans and the FDIC has to step up (oh, and btw, banks pay insurance premiums, 1/12% of their deposits), my personal question is: "What happened?" When the FDIC steps in to take over a bank, is it thoroughly investigated for fraud? Malfeasance? Stupid loans to family/friends? In 2010, the FDIC opened criminal investigations on 50 failed banks. Where are the prosecutions? That's the real question we ought to be asking. A Wave of Bank Prosecutions Is Unlikely - NYTimes.com