Fix Deposit Insurance, or the Bank Bailouts Won’t Stop
By Karen Petrou
Expanding the FDIC’s insurance limit of $250,000 “is not something we are considering,” Treasury Secretary Janet Yellen told a Senate committee on Wednesday. About the author: Karen Petrou is managing partner at Federal Financial Analytics and the author of Engine of Inequality: The Fed and the Future of Wealth in America. In 1933, President Franklin D. Roosevelt assured Americans that “all we have to fear is fear itself.” But when it came to federal deposit insurance later that year, FDR thought that a bit of fear would be good for banking-system discipline. He opposed the creation of the Federal Deposit Insurance Corp., conceding to it only when the deposit-insurance coverage limit was set at average household savings, about $58,000 in current dollars. Depositors today have lost any fear. The deposit-insurance ceiling is now a more-generous $250,000. Failed banks have been rescued for decades without repercussions for insured depositors. When the prospect of loss suddenly loomed at Silicon Valley Bank, adrenaline rushed back into the system…
https://www.barrons.com/articles/banks-deposit-insurance-bailouts-fdic-3330499c