Sure: If I didn't have mandated insurance, I would bank with the bank that maintained a high fractional reserve- It's obvious to anyone that you'd want to do this.

Banks that handled credit default swaps surprise had the lowest fractional reserves.

Of course. Next time I'm choosing a bank I'll be sure to pay close attention to the part of their brochure where they say what their fractional reserve is.

You don't have to, because of FDIC insurance...

...and now you know why things went to hell in 2008.

That's a completely different take on the financial crisis than anything else I've read. The history of the financial industry is one of the industry finding ways around existing regulation, over-leveraging itself, and then crashing.

Financial panics were a common occurrence before there were regulations. You're saying that less regulation would create a more stable system, but that historically has not been the case.

In other words, for what you're proposing, we tried it and it didn't work.

Actually, we sorta tried this between 1850 and 1920, which is pretty much the highest GDP growth time period in the history of the US.

Which also included a financial crisis and recession roughly every 10 years and ended with the Great Depression. How much faster would the economy have grown if it hadn't been plunged into recession once a decade?

http://en.wikipedia.org/wiki/Financial_crisis#History

Growth might have been faster or slower, who can say.

Its pretty clear that whatever not having mandatory insurance does, it doesn't suddenly imbue consumers with the insight and skill to manage their deposits in a way that avoids widespread catastrophic bank failures and attendant losses. This has been tested in the real world.