12/05/09 Stockholm, Sweden – On October 7th, we published this article that links to a list of 463 troubled banks. One of the institutions where I personally held a money market account was on the list. Taking my own advice I promptly closed the account. Today, as the number of bank collapses reaches an even 130, I feel a little bit vindicated in the decision.
According to the Wall Street Pit:
“Regulators closed banks in Georgia, New York, Chicago and Ohio on Friday, pushing U.S. bank failures to 130 this year. Assets of more than $1.4 billion and deposits of nearly $9.4 billion from the six banks were turned over to new lenders at a total cost of $2.384 billion to the FDIC’s deposit insurance fund, according to agency statements.
“The largest bank to fail was AmTrust Bank in Cleveland.”
AmTrust Bank, with “total assets of $12.0 billion and total deposits of approximately $8.0 billion,” formerly held some of my savings. Of course, the FDIC should successfully protect bank customers in the event of a bank failure. Regardless of how well it’s able to continue performing that service, I’m glad to not have to worry, or even think, about an AmTrust account today.
Read more details on the closed banks in the Wall Street Pitt’s coverage of US bank failures in Georgia, Illinois, New York, and Ohio.
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If we did not have the FDIC people might care a bit more where they put their money and we would never have had the crazy speculation over the last 10 years.
Without FDIC I don’t think there would be much banking going on period. Just like the stock market they would only put in what they could afford to lose, even better because you can’t deposit on margin. But without FDIC and the defacto death of banking in the USA there wouldn’t be huge financial institutions to give megabucks to the politicians, so it’s a non starter.
Government deposit insurance for banks is an extreme moral hazard. Taxpayer money should never be used to cover for failed business relationships, regardless of industry. Deposit insurance combined with fractional reserve lending strongly encourages individual depositors to not care about their bank’s financial condition, while simultaneously inducing banks to seek the riskiest investments in order to offer the highest rates on CDs (for example). Such a system is perverted and completely backward. It also enables fiat currency growth on an enormous and global scale. An ideal, austro-libertarian monetary system cannot coexist with government deposit insurance, regardless of whether you want a 100% reserve or free-banking FRB foundation.