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Which Depositors Should Suffer Losses When a Bank Fails?

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Comments (7)
Many people don't want to realize or accept that eh $700 million has been repaid and that the S&L matter was the result of a series of poor Washington solutions attempting to avoid the problems of a long running period of inflation by accepting faux capital structures to sustain the industry....I really don't care if only certain deposits have priority except that it will increase borrowing costs, and reduce credit necessary to build a strong econony...how about restricting deposits from funding non bank credit transaction making trading, derivatives etc to be supported by other higher risk and more costly forms of funding
Posted by Rhsmith999 | Sunday, February 10 2013 at 5:09PM ET
None of this works until you get rid of "too big to Nail, too big to Jail, and too big to Fail".Also, deposit mix would naturally shift to the insured DDA and Savings if they are still insured or have senior status.
Posted by mainstreetbanker | Saturday, February 09 2013 at 11:41AM ET
Alex, why not eliminate deposit insurance and just have banks offer money market accounts invested only in Treasury securities?
Posted by kvillani | Thursday, February 07 2013 at 5:18PM ET
FDIC insurance premiums didn't cover the cost of the most recent bank bailout by taxpayers of approx. $700 Billion. The FDIC's fund reached a high of approx. $53 Billion in the first quarter of 2008, which was inadequate for this crisis. $180 Billion in taxpayer dollars bailed us out of the S&L crisis according to the GAO. So how much will taxpayers be on the hook for when the next crisis hits? Which is why bank boards and bank execs, bank investors, and depositors should have more skin in the game not less as manifested every time FDIC coverage is increased.

VERIBANC, Inc.
Michael M. Heller, President
Posted by veribanc | Thursday, February 07 2013 at 4:55PM ET
FDIC Insurance premimums in the USA is paid by the Financial institutions who hold insured deposits. ultimately the cost of this insurance is paid by the depositors in these institutions. Perhaps Europe should try this model.
Posted by dameon | Thursday, February 07 2013 at 3:59PM ET
FDIC Insurance premimums in the USA is paid by the Financial institutions who hold insured deposits. ultimately the cost of this insurance is paid by the depositors in these institutions. Perhaps Europe should try this model.
Posted by dameon | Thursday, February 07 2013 at 3:59PM ET
Couldn't agree with you more. Reduce the moral hazard (FDIC protection - taxpayer protection) and you would have reduced the cost of the banking crisis. Its always easier to play with (ahem - risk) other peoples money.
VERIBANC, Inc.
Michael M. Heller, President
Posted by veribanc | Thursday, February 07 2013 at 2:55PM ET
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