Both Federal Reserve Chairman Alan Greenspan and Treasury Secretary Lawrence Summers recently expressed serious objections to increasing federal deposit insurance coverage. And with good reason.

As they said, increasing coverage from $100,000 to $200,000, as some have proposed, would subsidize the wealthy and encourage excessive risk taking by banks as the government absorbs more losses upon a bank's failure. But the objections should not stop there, because current government policy may already subsidize the wealthy and distort market forces.

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