Do you still have faith in the FDIC? If so, why?

I saw this question on another blog and the answers were very interesting. I thought I’d pose it here to see what comes up.

Do you still have faith in the FDIC? If so, why?

I have 100% faith in the FDIC to insure deposits if some small banks fail. I even have faith that they (combined with the Fed and the federal government) can handle things even if one large bank would fail. However, if there is a serious run on the banks in the United States, there is little or nothing that the FDIC, the Fed, or the federal government will be able to do to protect deposits, except printing vast quantities of money which would only cause hyperinflation and financial collapse.


“Your deposits insured by the full faith and credit of the US government” Back in the '80’s when nearly every savings and loan was on the brink of failure and hundreds in fact did fail the FDIC/US govt. stepped in to clean-up the mess and ensure liquidity and faith in the system. You might not like their policies or the fiat money everyone of us works so hard to obtain but name one other person/entity/govt etc. whom you would prefer to insure your financial system.

Absolute faith.

If worse comes to worst, they’ll print more money. I don’t think that is nearly as bad for the economy as allowing runs on the banks.

As far as I know, FDIC is only insuring deposits. They are not insuring loans, and most mortgage money is NOT coming from savings deposits; the bank borrows money elsewhere and re-loans it, making money on the spread. So FDIC is not as seriously affected by the sub prime mess as some might think. They do not quarantee the sucess of a bank, just that depositers will get their money back if the bank fails.

Trivia: in 1992, the economy of Argentina failed and it started a run on the banks in Uruguay (which is the Swis banker of South America) The United States made billions of dollars available the the banks of Uruguay and that gave the depositers enough faith to leave their money there, in the bank. Stopped the run, saved the economy of the entire county of Uruguay and enabled Uruguay to honor her international debts and not default.

It’s not theory that depositer’s insurance can literally save the economy of a country. It has been proven in the real world.

If the population loses faith in the banks and pulls their money out, it is devastating for the economy. The knowledge that deposits are insured by the federal government very effectively stops runs on the banks.


The savings rate in this country is -.06%!!! :biggrin

Now, if you asked what would happen if all the dopes in this country PAID OFF THEIR CREDIT CARDS!!! Then you’d be on to something. :biggrin

All kidding aside…My vote is…Full Faith…100%