Why any subsidy?

Reader comment on: Bloomberg on Banks

Submitted by Joe Vencil (United States), Jun 21, 2012 07:47

There is no good rationale for government sponsored deposit insurance. It is a subsidy to banks at the expense of the capital markets and has led to the banking sector being much larger and more concentrated than it would otherwise be. This creates a system with low risks in normal times and the potential for catastrophic collapse in unusually bad times. The market, however imperfect, is always dispassionate and apolitical, unlike committees of men (women) like the FDIC or the Fed, and better at pricing risk and allocating scarce capital.

Note: Comments are moderated by the editor and are subject to editing.

The Future of Capitalism replies:

For what it's worth, defenders of the system argue it isn't a subsidy because they pay premiums on the insurance that cover any payouts.

Submit a comment on this article

Other reader comments on this item

Title By Date
⇒ Why any subsidy?
[w/response] [90 words]
Joe VencilJun 21, 2012 07:47
Excellent Idea [22 words]LiberatedCitizedJun 20, 2012 15:49
Avoid Bank Failures Without a Bank Subsidy [58 words]David WeinkrantzJun 19, 2012 19:17
Why the strange rejections by your system [39 words]John GillisJun 19, 2012 18:28
Try Laissez-faire [67 words]John GillisJun 19, 2012 18:26
Once upon a time. [76 words]LyleJun 19, 2012 16:53
No FDIC insurance for investment banks [47 words]Jan TwardowskiJun 19, 2012 15:30

Comment on this item

Mark my comment as a response to Why any subsidy? by Joe Vencil

Email me if someone replies to my comment

Note: Comments are moderated by the editor and are subject to editing.