Re:Help the Library of Congress Create Games That Improve Pu...
by eru on Wednesday August 02, 2023 @01:47AM
(#36967373)
> Isn't "banks will be conservative and responsible" the argument for not having mandatory insurance?
The problem is not so much that the insurance is mandatory, but that it's provided by an entity whose pricing is set by the government, and which also enjoys the (implicit or explicit) backing of the government.
Privately and competitively provided insurance, even if mandated by the government, wouldn't be quite as bad.
Though I agree that giving banks the choice whether to get insured is a good one. Otherwise, you'd have to write regulation about what counts as 'good enough' insurance. Instead of letting customers of the bank decide what they are ok with.
So in other words the FDIC eats the cost but the FDIC is really the taxpayer, or the customers of "banking industry" which is to say basically everybody.
> If your gamble fails, not only do you lose everything related to your endeavor, but now banking as a whole is more expensive, more people centralize into the big banks, and whatever business you want to start up or run afterwards is going to be more expensive.
But if your gamble succeeds you make an enormous amount of money and if it fails someone else pays most of the cost, so it's more profitable to make the gamble because you have privatized gains and socialized losses.
> You can be a boring bank and most likely mint profit for yourself for eternity, while also being seen as a positive actor in your city!
Are banks known for their desire to leave money on the table?
Isn't "banks will be conservative and responsible" the argument for not having mandatory insurance?