http://blogs.reuters.com/rolfe-winkler/2010/06/10/a-crisis-not-wasted/ Option ARMageddon Thu, 09 Aug 2012 01:58:02 +0000 hourly 1 http://wordpress.org/?v=3.4.2 http://blogs.reuters.com/rolfe-winkler/2010/06/10/a-crisis-not-wasted/comment-page-1/#comment-5668 cuddyent Fri, 11 Jun 2010 08:58:30 +0000 http://blogs.reuters.com/rolfe-winkler/?p=6319#comment-5668 Those weak banks might not ever get large enough to cause a financial stir if the FDIC made some of their ratings public. After all we have to bare our financial souls to borrow a dime, why shouldn't banks have to prove their solvency to their customers? Then consumers would shun weak banks before they got too big. Those weak banks might not ever get large enough to cause a financial stir if the FDIC made some of their ratings public. After all we have to bare our financial souls to borrow a dime, why shouldn’t banks have to prove their solvency to their customers? Then consumers would shun weak banks before they got too big.

]]> http://blogs.reuters.com/rolfe-winkler/2010/06/10/a-crisis-not-wasted/comment-page-1/#comment-5667 RickGomez Thu, 10 Jun 2010 13:22:11 +0000 http://blogs.reuters.com/rolfe-winkler/?p=6319#comment-5667 I agree that giving the FDIC resolution authority has been helpful. That aside, it still begs the question of whether deposit insurance is effective at preventing bank failures to begin with. If you take for granted that some number of banking institutions will fail no matter what, I suppose deposit insurance makes sense. But what if deposit insurance is largely responsible for the existence of those weak savings banks in the first place? Would consumers willingly deposit their funds, thereby allowing the bank to function, in the absence of deposit insurance? I'm not sure of the answer, but we have to think about the FDIC's resolution authority as seperate and distinct from FDIC insurance. The former is necessary and effective, while the latter is problematic. I agree that giving the FDIC resolution authority has been helpful. That aside, it still begs the question of whether deposit insurance is effective at preventing bank failures to begin with. If you take for granted that some number of banking institutions will fail no matter what, I suppose deposit insurance makes sense. But what if deposit insurance is largely responsible for the existence of those weak savings banks in the first place? Would consumers willingly deposit their funds, thereby allowing the bank to function, in the absence of deposit insurance? I’m not sure of the answer, but we have to think about the FDIC’s resolution authority as seperate and distinct from FDIC insurance. The former is necessary and effective, while the latter is problematic.

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