So isn’t this one of those cases where the market is supposed to respond?
If FDIC genuinely topped out at 250k, and there exist customers who have more than 250k they wish to deposit, the market should be able to respond by providing private insurance for cash balances over 250k.
Your premium would presumably depend on the balance and the risk profile of the institution where you’re keeping the balance. Insurance providers would want to audit institutions at which their customers are holding those balances to make sure they have a risk profile consummate with the insurance premiums they’re collecting.
You, know, like insurance companies do.
Should lead to private banking accreditations that have the same imprimatur value as ‘FDIC insured’, but privately funded, right?
Now people might say ‘too big to fail policies are why that kind of product doesn’t exist’; but it’s not like products like that were in widespread use before 2008… has the banking industry just always assumed that federal insurance is effectively unlimited?
The above explains how the system is flawed and the solution is not to throw public funds at banks to in a way reward risk taking. I don't generally support bailouts.
Again, the system is intentionally made this way. Insurance would not even be needed if safer banking models were approved, which they're not.
If FDIC genuinely topped out at 250k, and there exist customers who have more than 250k they wish to deposit, the market should be able to respond by providing private insurance for cash balances over 250k.
Your premium would presumably depend on the balance and the risk profile of the institution where you’re keeping the balance. Insurance providers would want to audit institutions at which their customers are holding those balances to make sure they have a risk profile consummate with the insurance premiums they’re collecting.
You, know, like insurance companies do.
Should lead to private banking accreditations that have the same imprimatur value as ‘FDIC insured’, but privately funded, right?
Now people might say ‘too big to fail policies are why that kind of product doesn’t exist’; but it’s not like products like that were in widespread use before 2008… has the banking industry just always assumed that federal insurance is effectively unlimited?