Lately, I have been thinking about exactly what it is that modern banking has evolved into. It is no longer about safety and security, instead focusing on speculation and trading. It has become impervious to the normal political process; it has consolidated to the point of being anti-competitive, with an enormous size advantage held by the top 10 banks versus smaller and/or non depository competitors.

Then, the solution dawned on me –  all it would take is the right person (with the support of their board) sending a simple letter.

I slipped off to the near future, and grabbed a copy of a fascinating letter. It ended Too Big to Fail, eliminated taxpayer liability for reckless speculation, freed Hedge funds and investment banks from onerous regulations, and made the entire financial system safer and more stable. I was able to sneak it back home to 2012.

Here is that letter from the office of the Federal Deposit Insurance Corporation’s chairman, circa 2015:

 

 

 

May 23, 2015

 

Dear Banker,

Thank you for your cooperation in our most recent series of bank stress tests. We had hoped that these would not be required, but following the credit crises of 2007-08 and the more recent banking crises of 2014, the FDIC simply had no choice.

The results of these tests are in, and they are unfortunately much worse than we had hoped for. The recent losses of billions of dollars in trading has made it apparent that nearly every major depository bank is in far worse financial condition than previously believed. The majority of top 20 banks never fully recovered from the earlier crisis, and have insufficient capital to withstand any further pressure. This is especially a concern if the economy takes another turn for the worse, or if Housing begins its third leg down.

Capital reserves are insufficient to support the trillions in deposits of yours that we guarantee. Ever since leveraged speculation has become the primary business of these banks, we have grave concerns about the promises you have made to your depositors. The recent turmoil in Europe, the wild currency swings around the world, and that recent unfortunate incident in China has made the current state of banking extremely risky.

Following the most recent bank failures, the Federal Deposit Insurance Capital Reserves have fallen to perilously low levels. This pool of capital is the guarantor of public monies deposited in demand accounts in the actual bank divisions of your firm. We cannot sit idly by while this becomes exhausted due to your speculations, thus putting taxpayers monies at great risk. Nor can we assume unlimited liability in guaranteeing deposits at firms that were once depository banks but now have morphed into giant derivative trading casinos with potential liabilities measured in the trillions of dollars.

Therefore, as chairman of the FDIC, with the full support of my Board of Governors, we have decided upon the following changes:

1. Effectively immediately, we have increased the FDIC deposit insurance for any US bank that engages in ANY trading of derivatives or underwriting securities or other investment banking activities by threefold. This 3X fee increase goes into effect immediately. It applies regardless whether these trades are hedges for proprietary trades or are made on behalf of clients.

2. Effective in 90 days, we are LOWERING the insured maximum insured deposit liability to $100,000 per account for derivative trading firms. Effective in 180 days, the insured maximum insured deposit liability drops to  $50,000 per account.

3. Effective in 1 year from today, on May 23, 2016, we will no longer offer deposit insurance for any firm that engages in derivative trading, underwriting securities or engages in Investment banking.

4. Any bank with fewer than 10,000 depositors or less than $5 billion in assets may apply for a discretionary waiver of these rules.

It is not our position to tell you what sort of non depository banking activities you may engage in. Those are business choices you and your firm are free to make. However, it is also our position not to engage in foolish insurance underwriting. We have elected to be more conservative in ourrisk management and assumptions,  and therefore cannot guarantee the kinds of risks that your firms have been undertaking.

This action should delight many of you. In the recent speeches of several bank CEOs,  many of you have longed for a return to the days of less regulation and a truer free market. Once you no longer qualify for our insurance due to your other businesses, you will be freed up from all of the onerous bank reviews and regulations that are part and parcel of FDIC insurance.

As a bonus, without the intervention of government guarantees, those of you who continue to have depositors will finally be able to compete in a free and open market. Without FDIC insurance, your depositors will be making their decisions based on your reputation, and their assessment of the safety and security of your operations — and not Uncle Sam’s willingness to continually bail you out.

You have the FDIC’s best wishes for success in the future — just not our insurance.

If you have any further questions, feel free to contact my office.
Thomas Hoenig

Chairman, Federal Deposit Insurance Corporation

 

Category: Bailouts, Corporate Management, Credit, Regulation, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

53 Responses to “FDIC Rule Change Ends Too Big to Fail”

  1. denim says:

    You are a genius. I would put you on the short list for Secretary of Treasury.

  2. Fred C Dobbs says:

    Silly idea. Legitimates engaging in risky activities. Deposit Insurance only works if a few fail at a time, so long as they are not individually or in the aggregate bigger than the fund. The real world problem with the banking system is the holding companies. On paper and theoretically fine, but in real life it isn’t. Imagine you have worked long and hard at a bank, and are promoted to CEO of a one-bank holding company. The holding company that owns all of the stock of your bank is someone who spent his whole career in Wall Street trading etc. and thinks he know how you should run the subsidiary bank. He invites you to lunch, and tells you what he thinks would be good for your bank. Two alternative scenarios: (1) you agree (which means you don’t know how to run the bank, and shouldn’t be CEO if an inexperienced, no-nothing outsider does and you don’t), (2) you disagree and you start looking for another job or retirement. You choose between your selfish desire to salt away plenty of dough so you and your family can enjoy the 1%-er life you have risen to, and what is best for your bank, its customers, and employees. Which would you decide to do? Being human, you take the money, shut your mouth, go along, and kick the can down the road for someone else to deal with if it doesn’t work out. You get yours. You know if the holding company’s CEO idea wins, he takes the credit, and if it fails, you get the blame. It goes with the territory, you accept that, and you are bought and paid for by the holding company with the bank’s money. This is why the holding company concept may be theoretically good, but bad in practice.

    ~~~
    BR: It is how FDIC was originally conceived, working in tandem with Glass Steagall.

    I understand why a socialist like yourself does not want your bank to have to stand on its own feet without government support, you Che-supporting corporate welfare queen!

  3. PeterR says:

    Yes!

    So obvious a solution, yet so unlikely to come out of the brothel.

  4. Silly Me..here, I thought that the ‘New’ Director–fully Committed to..”…a bonus, without the intervention of government guarantees, those of you who continue to have depositors will finally be able to compete in a free and open market. Without FDIC insurance, your depositors will be making their decisions based on your reputation, and their assessment of the safety and security of your operations — and not Uncle Sam’s willingness to continually bail you out.

    You have the FDIC’s best wishes for success in the future — just not our insurance…”–was going to be a Real Statesman, and put the Whole of the FDIC out of Our Misery..

    …Without FDIC insurance, your depositors will be making their decisions based on your reputation, and their assessment of the safety and security of your operations — and not Uncle Sam’s willingness to continually bail you out…

    FDIC ‘Insurance’ is Soma..

    “…”the warm, the richly coloured, the infinitely friendly world of soma-holiday. How kind, how good-looking, how delightfully amusing every one was! “…”
    http://www.huxley.net/soma/somaquote.html

  5. I love this fantastic future FDIC chairman and congratulate him on his appointment!

    Before sneaking back from the future to share this letter with us… Did you happen to notice the name of the President who appointed him?

    Just wondering… since I can’t imagine that either of the two duopoly-offered possibilities could have been the one to make this appointment.

    Did Ron Paul or Ralph Nader end up winning somehow?

    ~~~

    BR: Hoenig is the current vice chair — we have to assume an accident or incapacitation of the a chairman allowed for his stealth elevation!

  6. dead hobo says:

    2014?

    The one coming up in Europe next month will be the event of the season. Be there or be square.

    The crazy 8 ball is a little cloudy on the US. But you can bet there are more idiots lurking in the shadows just waiting to create another billion dollar accident using insured OPM.

    And we will all enjoy CNBC asking everyone “when did it become illegal to lose money in America,?” while ignoring the use of insured OPM. PS Bloomberg gets most of my attention now, except for when I need to see the actually excellent main screen on CNBC that has all the important numbers. PSS Maria’s phony speech impediment has officially chased me away whenever I see her on screen.

    ~~~

    BR: Never a bad idea to push your predictions off further into the future. Less people remember how wrong you were that way. ;)

  7. bobnoxy says:

    And then reality sets in. The big banks tell this guy to shove it and remind him who really has the power in America by getting him removed from office, never to be heard from again.

    The banks order Congress to strip the FDIC of all power and funding, Jamie Dimon is appointed Chairman of the Fed and Goldman alumni are given exclusive access to cabinet level appointees in any department with any authority over financial matters.

    The banks blow up again, threaten the middle class with never ending poverty if they don’t acquiesce to the next round of bailouts, and onward we go.

    The Fed was established for one thing alone; protect and bail out the banks. That ”dual mandate” horseshit is just cover to make everyone else think they serve a purpose for the greater good. How have they done with full employment and stable prices lately?

    And the Pixie Dust Fairy sprinkles us, the media and our elected dumb asses again and we all wait to hear where the Fed thinks the economy is headed and quickly invest accordingly.

    I think we’re just too stupid to be saved.

  8. Jim67545 says:

    Good Luck.
    I think that the genius in this is that it is arbitrary – no discretion required. The FDIC (and the 100 or so other federal and state bank and insurance regulators (another problem)) carped about the symptoms of the last blow-up (higher delinquency and charge-offs) as they began to appear but missed the housing related crash before and while it was building to bubble-land. If they could miss soooo large an event, which they were certainly in a position to see, relying on regulation and the effective application thereof is probably futile.

  9. A says:

    Conceptually, an excellent idea.

    The question is, why would any government institution wish to rattle its owners ?

  10. cjb says:

    To be added to a future W.P. Editorial?

  11. louiswi says:

    Dear Tom,

    Did you forget how you got that frickin’ job? Did you forget I had you by the nuts before you got that job and still do? Cram your letter!

    As always,

    Jamie

  12. mrg says:

    Lol, I love it- isn’t this what I asked in a post a day or two ago? I can’t understand for the life of me why the FDIC doesn’t actually just DO this!

  13. constantnormal says:

    A pleasant fantasy …

    … but while such a move is entirely legal and possible, it would be certain career oblivion for the FDIC head who issued it, they would likely be fired forthwith and their replacement would erase this policy before it ever took effect …

    … what we need for such a move to work is millions of people rioting in the streets of D.C. …

  14. constantnormal says:

    … what we need for such a move to work is millions of people rioting in the streets of D.C. …

    … BEFORE the elections …

  15. MayorQuimby says:

    Barry you forgot the most important part!

    Reserve requirement of 10% minimum.

  16. whskyjack says:

    I suspect if you put it to a vote of the FDIC member institutions your letter would pass with over whelming support.
    A long time friend and small town banker’s biggest gripe is the fact that he pays his insurance fee on all of his assets and the big boys only pay fees on part of theirs. They have large chunks of assets that place the institution at risk that are not subject to fee yet if those assets bring the bank down the insurance kicks in. In other words the small bankers are subsidising the mega banks.

    Jack

  17. AHodge says:

    A beautiful thing
    narrow banking via a lubricated rear entry
    since no one has the balls to do it straightforwardly
    Hoenig clearly the right one to gitr done
    he is on the right side

  18. AHodge says:

    we also need to get these bloated mutants off the payments system and discount window
    amd make it clear no rescue for the bad parts

  19. Moopheus says:

    That’s funny, my dream-memo-from-the-future ending TBTF came from Sec. Gates at DoD and involved sorties of B2′s dropping payloads of bunker-busters.

  20. DeDude says:

    “Any bank with fewer than 10,000 depositors or less than $5 billion”

    I think that is supposed to be: “Any bank with fewer than 10,000 depositors AND less than $5 billion” We don’t want the iBanks to kick out depositors in order to retain their insurance.

    ~~~

    BR: No depositors, no insurance

  21. toombsie says:

    Wouldn’t work. Would raise the banks costs, but they’d pass it on with predatory fees aimed at the lower classes (minimum balance fees, overdraft fees, etc.).

    Secondly, a lot of people have bank accounts that exceed the FDIC insurance limit anyway. Thus they are prone to pulling their money out when a bank is in trouble. You’d still have the problem of bank runs. And if a bank is still relatively large (which is likely even under your scenario), and if it’s got millions of trades on its books with other banks, it’s failure could still lead to a systemic Lehman like crisis, especially if it’s involved with money market funds or other funds that are persumed safe.

    So you’d still have the government stepping in to save the institution even with these rules.

    The only true stop for too big to fail is #1, strict Glass-Steagal outlawing of derivative trading and other gambling for profit by an FDIC insured institution. #2, cap on size of banks assets with relation to GDP (say no larger than 2% of GDP). And then #3, you still have to have aggressive regulators trying to stop these banks from taking new unseen risks.

    Modern banks engage in socially destructive practices (such as proprietary trading, or the inflating housing bubble with fraud) because it leads to giant paydays for the executives. The bigger the bank, the larger the payday. We have to somehow change society to where banks can’t be used in this manner. Let hedge funds be the place where this goes on, and cap the size a hedge fund can be to where it won’t bring down the world like LTCM did. I think there needs to be limits on trade size in a given market. Any time a hedge fund or bank puts on a trade so large that it effects prices, destruction ensues. Thus they need to figure out a method for monitoring and preventing that.

  22. GreatWarrior says:

    FDIC has been long criticized for enabling the risky banks to lure deposits with high interest and thus enabling risky bad loans.

    Getting rid of FDIC insurance is one thing. Why not create a simple 2 tier FDIC? Those well managed traditional bank gets usual $100K FDIC insurance, while those risky banks gets $10K insurance?

  23. WaltFrench says:

    My concern is that this letter would be received with first, a shock, then high-fives and “WOOHOO!!!”’s all around.

    All the MOTUs who work with BigIBank #1 would appreciate the promise of an extra basis point or two on their money market funds, and would know that they would be able to yank their funds if any trouble or credit issues arose — just as they were doing, to the tune of about $1.5 Trillion, when the Reserve Fund got in trouble.

    And come that day, likely only a few months later thanks to the new, wide-open and non-overseen playing field, Fed Chairman Stieglitz, even, would not be able to sit by and supervise the implosion of the West. He would, as Bernanke did, extend ex post facto FDIC coverage to these newly non-bank banks. Because he would have no choice.

    FDIC insurance is great for depository institutions. As AIG and too many others have shown, non-depository institutions are also capable of wreaking havoc on us all. Voluntarily, without implied insurance. Nice try; I like the spirit, if not the likelihood or probable practical effect.

  24. iLoveBeer says:

    Nice in theory, but in practicality it would create an insane amount of bank runs by deposit customers.

    The only way to stop this system is for depositors to move their money… cut the banks off at the source.

    ~~~

    BR: One man’s bank run is another man moving his money!

  25. Winston Munn says:

    Too Jewish. A number 6 would work better.

  26. Raleighwood says:

    However, it is also our position not to engage in foolish insurance underwriting.

    How quaint.

  27. IMHO says:

    Why can’t FDIC insured deposits get paid out first when the bank goes under, in addition to these rules.

    And don’t we need to do something about retirement account investments in these same big failing banks?

  28. Chad says:

    This just makes me sad. So, easy and rational. Yet, it will never happen in a million years.

  29. dbrodess says:

    Bravo! Suggest this as topic for your Washington Post column this week.

  30. AHodge says:

    some unwitting or other bank stooges are here raising fallacious objections
    taking away subsidies and guarantees will of course raise banks costs/lower profitablity
    thats the idea geniuses
    show the system wont work well with that
    or with somebody new and better coming in

    im againstany kind of help or continued subsidy for the money market funds
    Yellen and the fedare actually working on this
    if we pull their priveleges they may no longer be big anough to do so much damage

    several here stillact like we cant have any major writedowns
    too shocking at the wrong time
    wrong
    prove that especially if the alternative is short acting tax cuts or spending
    your crap will cost us
    you will only get the bill presented later
    and all you have done is preserve bonholders big MMF holders
    how much ofwhat you saved them will they spend?

  31. 873450 says:

    Why can’t Wall Street have a nanny?

  32. pintelho says:

    Bravo! Please put this in WaPo…this needs to be read by everyone. Brilliant idea.

  33. Liminal Hack says:

    Completely agree with the plan here BR.

    Of course it would likely result in banks offering negative nominal interest rates or significant deposit fees, plus deflation and seriously negative yields on treasuries.

  34. carleric says:

    Terrific idea…of course I support anything that will get banks off the public dole. Perhaps it will also stop banks from defending the pay practices wich reward incompetence with job security because they really need “all that failed talent”.

  35. mathman says:

    Since this is just a mental exercise and since there is no “future” the way we’re going anyway, let’s just let the industrial economy implode from the great misdistribution of wealth, the pervasive and unending pollution, and the lack of resources. Then we can “start over” in a few hundred thousand years when nature regenerates and maybe do it “right” or “correctly” next time.

  36. michaelb says:

    Brilliant.

  37. S Brennan says:

    BR,

    Are you sure the WAYBAC wasn’t set to 1933?

    Back then and the 40 years that followed giants arose from this country turning back every disaster and making an effort to solve the social ills that they had inherited. They saw opportunity in rectifying troubles besetting the US. Why in that time, a man once turned a deadly nuclear confrontation into a race to the moon…it was quite a conjuring trick…eight years later we strode upon the moon and even our deadly enemies congratulated us on our supremacy of science. Such was the power of men who believed in their country.

    Then the dwarfs moved in…and told us we would be even greater if we unleashed the forces that almost destroyed the country in 1929…self-regulate everything…make the lower classes pay for government…make higher education unaffordable again…tax the .1% at much lower rates than what a working man pays…government is evil, but let the .01% use it to their ends.

    Freedom to choose! And choose we did, first the .01% went after the blue collar factory worker and the nation cheered, then they came for the technical professions and the nation cheered, finally the upper middle class was told to board the train and the .01% cheered.

    It seems to me Milton Friedman, left out a few details in his 12 hour slickly produced diatribe against government, BTW, shown over and over on PUBLIC TELEVISION.

    I never bought into Milton Friedman’s vision of utopia. Milton Friedman made it clear, if we would only abandon the new deal regulations and return to 19th century economics [without the protection of mercantilism] we would live in heaven on earth. Many of the boomers drank the snake oil, never asking themselves…why did we abandon that system in the first place…what did our elders know that we didn’t? I’ve been forced to watch my nation as it was directed to disrobe for the promised shower in the 19th century’s typhoid infested water.

  38. Lookout Ranch says:

    Brilliant!

  39. [...] How to end the TBTF bank problem.  (Big Picture) [...]

  40. dpharris says:

    Maybe i’m the moron, but I still don’t see how this solves Lehman, AIG, etc.

    http://dealbreaker.com/2012/05/whom-should-we-prevent-from-blowing-themselves-up-and-why/

  41. S Brennan says:

    Mathman,

    What you described is a self-regulating model…which is the accepted dogma of the rulers…buyer beware, markets always reach an equilibrium, regulations are always evil, let power..er..eh..the market decide!

    Ah…the deliciousness of humans base condition…let’s return to the days of old…when rape, slavery, murder and mayhem were part of every family’s daily life…a life free of government intervention! Oh the good old days before safety and security gave us the wherewithal to pursue science, medicine and art.

    The good old days before the collective nanny state, where those humans foolish enough to build and improve the lot of those they cared for were stolen from by bands of roaming thugs and they and the families were sold off as slaves…yes, the government free past beckons.

    We can all be Galts, never sleeping, always young, eating raw grubs and worms while we keep all night vigils to prevent our family from being captured and sold as slaves…how much more preferable to paying our fair share of taxes, agreeing to obey laws and conducting trades of goods and services in an ethical manner. Let’s regress to before those odious first laws of Babylon that specified how to conduct business*.

    *Yes, that’s right, the first written civil laws recorded where addressing shoddy business conduct…imagine that.

  42. Tioga says:

    There are a lot of good ideas in these comments. It is a societal problem. Everybody suffers if a bank fails, the way things presently work, so the public thinks the Government wouldn’t dare close the zombie (failed) banks, pay off the depositors to the insured limit and let them suffer any loss. Closing the banks is a political problem, first last and always. And the Wall Street Bankers know this, and are daring the Politicians to throw them out and shut them down. So far, they are winning. The Politicians (and their underling regulators) have changed the rules to keep them in business, refused to prosecute them for egregious risk-taking, lying and just plain bull-shitting everyone. After reading the comments I spent almost an hour trying to find the name of the actual, real life president of either of the two JP Morgan Chase (NYSE-Listed) bank subsidiaries. It is the CEO who can go to jail, not the credit card salesman from Chicago Jamie Dimon, if the banking laws are violated. I couldn’t find his name in the annual report or proxy statement, and obviously couldn’t find his compensation. It appears a gentleman from Texas who has worked his whole life since college for the BancOne may be the CEO, but it is not certain. If it is, you can be sure he was retained and promoted because he is mediocre, for talent and merit do not rise in institutions like his, leave when they figure out. Loyalty and subordination is all that matters. Thus, the US taxpayers are depending on him to exercise his own banking business judgment and run the bank honestly and ethically for the benefit of society, when he is obviously under Dimon’s thumb. This is why the smoke and mirrors that lets many think Dimon runs a bank should be dispelled? He runs a gambling company that owns entirely a bank that is suppose to run itself independently of the gambling company. If not run independently, the fiction of being separate and a bank disappears, and the gambling company becomes a bank, in fact, if not in law. The FDIC proposes to fix the situation by seizing the deposit-insured subsidiaries. The sooner the better. The losers then would be the fools who own JP Morgan Chase (NYSE-Listed), and JP Morgan Chase, National Association, the bank might be saved with a little capital infusion. Thailand seized 6 or 7 of its largest banks one Friday afternoon in 1998 as advised by the IMF, and all of them opened up the next day, without the big shots like Dimon calling the shots. In time, the banks were consolidated, sold off to foreign banks etc. The depositors never lost a dime. The depositors not losing a dime is what banking is all about isn’t it?

  43. [...] TBTF A simple proposal that could end too big to fail – Barry Ritholtz [...]

  44. mathman says:

    Senor Brennan:

    i’m convinced that the nuclear issue (Fukushima, Chernobyl and the 400 aging reactors we have running around the world – none of which properly disposes of the spent rods and other radioactive stuff), combined with global climate change (argue all you want – it’s as real as day and getting worse) (which we ALSO haven’t addressed), added to the increasing scarcity of potable water and other resources (including ones for energy and growing food, peak everything), on top of the fact that the earth is overpopulated with lethal humanity (like a cancer), not to mention all the other problems like runaway (non-radioactive) pollution (plastic, CO2 and now methane) from the “way we live”, overfished and increasingly acidic oceans, and loss of biodiversity and species extinction limits our human future to a bleak scenario in the short run and extinction (due to our inability to even get along with each other) before long.

    We’ve effectively painted ourselves into a corner, as a species, with no way out. There is no leadership any more, no action being taken on ANY of the concerns listed above (and that’s a brief list – i didn’t even mention the global economic meltdown among other issues we continue to ignore) and our warlike side seems to be taking over with no concern for any collateral damage (like our continued existence).

    i agree we can’t go back (and wasn’t suggesting it) to some fictional earlier golden age, but as you can see there’s no going forward either now. We’re on our way out. As the electrical grid fails we’ll be plunged instantly into the Stone Age and all that nasty human behavior we never learned to control that you pointed out will reassert itself (greed, selfishness, “survival” mode, craziness). It’s every person for themself i guess, because we don’t know how to cooperate any more. Once food becomes scarce or some epidemic takes over, calamitous environmental event (megaearthquake, multiple volcanic eruptions, runaway drought and sporadic flooding elsewhere) occurs, global war breaks out – 0r some combination of these and others too numerous to mention, we’ll react as usual – stupidly.

    It’s become appallingly obvious to me that our species was a failed experiment, plagued by design flaws and an inability to learn from our mistakes or care for each other and especially that we didn’t take care of our support system the planet.

  45. willid3 says:

    i like it. just doubt that the FDIC president would be allowed to do it. they can’t even raise the premiums to levels that would pay for their obigations

  46. 873450 says:

    01/09 – If President Obama issued this ultimatum to TBTF CEO’s during their first White House meeting:

    - Occupy Wall Street may not be necessary.
    - Political contributions from TBTF would be radioactive. Obama wouldn’t need dirty Wall Street money.
    - Obama would have long coat tails.
    - The upcoming POTUS election would not be a close race.

  47. nicholasteague says:

    A novel idea Barry.

  48. AtlasRocked says:

    Well done, Barry.

  49. [...] the Federal Deposit Insurance Corporation to banks and financial institutions in the year 2015, Barry Ritholtz proposes a policy that “ended Too Big to Fail, eliminated taxpayer liability for reckless [...]

  50. TacticalMan says:

    I’ve written about this at times in my client newsletter for the past 15 years. The FDIC raise in insurance back in the JC days was the precursor to the junk bond fiasco of the late eighties and allowed banks to do what they wanted and not worry about depositors. Depositors didn’t/don’t care about the credit worthiness of their bank because “the govt is protecting us.” So they go for the highest yield regardless. Get the govt out and make the private sector create their own insurance system like the insurance companies have. You would have true pricing rather than taxpayer subsidized premiums. We would all be much better off.
    PS – The bailouts are/were a “traveshamockery” in that they only bailed out execs, shareholders and bondholders and screwed everyone else.

  51. Shadowfax says:

    Good stuff. I’d like to see anti-trust actions simply break them up to under $200 billion each. Further, we can separate investment and depository banking along Glass-Steagall lines. The entire Dodd-Frank Act simply doesn’t even get into the ballpark.

  52. Per Kurowski says:

    I just wanted to leave note of my comments on how to break up a too big to fail and too big to capitalize bank in hours!
    http://bit.ly/M9UNOt