To the Editor:

As much as I agree that the deposit system insurance seems arcane, especially in the context of the Viewpoints article "While They're at It, Can They Fix Deposit Insurance?" [Aug. 15], expanding insurance coverage to $500K (a "mammoth sum" according to Profs. Miles and Trefzger) per institution would be akin to lowering the speed limit on our nation's highways to 45 miles per hour instead of the standard 55 mph because everyone is in agreement that there is a strong correlation of speed to road fatalities. So by moving the insurance coverage cap to (another) arbitrary dollar amount, it's the equivalent to saying that a 45-mph speed limit produces YOUR acceptable number of deaths on our highways. The problem is that apart from the political difficulty of getting deposit insurance reform passed (and the fact that it is one of the items that any of our government agencies actually handle extremely efficiently), either extreme could produce even worse unintended externalities (i.e., 100% of deposits insured may lead to deposits going to unworthy institutions versus no insurance at all, where all but the strongest 20 banks in the country would be able to capture a significant deposit base).Gregory Schein
Managing director
Insured Deposits Conduit
Coconut Grove, Fla.

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