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September 2009



The FDIC and the Follies of Modern Banking

September 05, 2009 – Comments (9)

The FDIC attempts to universalize risk in banking. Regardless of whether or not you even deposit money in a financial institution, whether or not you discriminate between different banks and the practices thereof, we are forced into subsidizing risk through government deposit insurance. The FDIC normally guarantees deposit insurance up to $100,000, while the insurance temporarily covers $250,000 of deposits until 2013. It does not take much to realize that bank management will make different decisions, pursue riskier ventures, and accept financially-qualified clients if they know the FDIC has their back. The moral hazard that comes with the FDIC is undeniable.  [more]



The FDIC and the Follies of Modern Banking: Part 1

September 02, 2009 – Comments (0)

When the Federal Reserve was signed into law in 1913, it was largely on the basis that the independent organization would assume the role of "lender of last resort" to struggling banks and institutions. This would allow the Fed to extend credit in order to prevent short-term economic hardships. As I wrote in my article, Deception in “Free Market” Banking, banks had not experienced troubles because of the free market as is regularly assumed, but through the government-protected fractional reserve system that allowed banks to overextend themselves and deceive depositors:  [more]

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