"The benefits of deposit insurance, as significant as they are, have not come without a cost. The very process that has ended deposit runs has made insured depositors largely indifferent to the risks taken by their depository institutions, just as it did with depositors in the 1980s with regard to insolvent, risky thrift institutions. The result has been a weakening of the market discipline that insured depositors would otherwise have imposed on institutions. Relieved of that discipline, depositories naturally feel less cautious about taking on more risk than they would otherwise assume. No other type of private financial institution is able to attract funds from the public without regard to the risks it takes with its creditors’ resources. This incentive to take excessive risks at the expense of the insurer, and potentially the taxpayer, is the so-called moral hazard problem of deposit insurance."
So, my understanding is that raising the insurance is increasing long term systemic risk to avoid short term bank runs.
Finally, the OTHER GREAT WORRY is the credit market freeze-up. Our parent company, General Electric, priced a large secondary at $22.25 this morning, largely to deal with its difficulty rolling over short-term commercial paper. If GE is having trouble rolling over paper, this is an issue that needs to be addressed.
If you think anyone in their right mind wants to be offering shares for sale in THIS MARKET, you got to get your head checked.
If I was to smile and I held out my hand
If I opened it now would you not understand?
"The benefits of deposit insurance, as significant as they are, have not come without a cost. The very process that has ended deposit runs has made insured depositors largely indifferent to the risks taken by their depository institutions, just as it did with depositors in the 1980s with regard to insolvent, risky thrift institutions. The result has been a weakening of the market discipline that insured depositors would otherwise have imposed on institutions. Relieved of that discipline, depositories naturally feel less cautious about taking on more risk than they would otherwise assume. No other type of private financial institution is able to attract funds from the public without regard to the risks it takes with its creditors’ resources. This incentive to take excessive risks at the expense of the insurer, and potentially the taxpayer, is the so-called moral hazard problem of deposit insurance."
So, my understanding is that raising the insurance is increasing long term systemic risk to avoid short term bank runs.
Dude i agree with you.
It is a huge moral hazard, but what the fuck?
It is already there. We've had FDIC for what, 70 years or more?
You're telling me NOW the American people want to stick to their formally-non-existant guns about the principles of moral hazard in the banking industry?
The Federal Reserve is NOTHING but a MASSIVE moral hazard.
Period.
Arguing a raise in the FDIC at this point is absurd.
And further, fuck Alan Greenspan, the asshole wrote a HUGE essay about THE EVILS OF FIAT and how GOLD WAS THE ONLY PROTECTOR OF THE PEOPLES WEALTH AGAINST STATIST INTERESTS.
And where did he go with that thought?
:rolleyes:
Look, he was right.
The concept of the FDIC=Moral Hazard is a giant fucking "No Duh" to anyone with half a brain. The fact that Greenspan even felt the need to say it is a joke. ESPECIALLY given his tenure as Reserve Chairman. WTF?
Man, honestly i don't even care which way it goes.
I just find it laughable that suddenly everyone is all for standing firm on principle with regards to banking legislation.
Where the fuck was everyone before this crisis?
:(
If I was to smile and I held out my hand
If I opened it now would you not understand?
Comments
Greenspan can say it better than me:
"The benefits of deposit insurance, as significant as they are, have not come without a cost. The very process that has ended deposit runs has made insured depositors largely indifferent to the risks taken by their depository institutions, just as it did with depositors in the 1980s with regard to insolvent, risky thrift institutions. The result has been a weakening of the market discipline that insured depositors would otherwise have imposed on institutions. Relieved of that discipline, depositories naturally feel less cautious about taking on more risk than they would otherwise assume. No other type of private financial institution is able to attract funds from the public without regard to the risks it takes with its creditors’ resources. This incentive to take excessive risks at the expense of the insurer, and potentially the taxpayer, is the so-called moral hazard problem of deposit insurance."
So, my understanding is that raising the insurance is increasing long term systemic risk to avoid short term bank runs.
Just to give you another update,
GE, yes the MASSIVE conglomorate, General Electric, parent company of NBC Universal, and a gianormous financing corporation, as well as manufacturing company ... IS HAVING SO MUCH TROUBLE GETTING SHORT TERM CREDIT THAT IT HAD TO DILUTE ITS SHARES WITH A STOCK OFFERING TO COME UP WITH CASH! [bottom of report]
If you think anyone in their right mind wants to be offering shares for sale in THIS MARKET, you got to get your head checked.
If I opened it now would you not understand?
Dude i agree with you.
It is a huge moral hazard, but what the fuck?
It is already there. We've had FDIC for what, 70 years or more?
You're telling me NOW the American people want to stick to their formally-non-existant guns about the principles of moral hazard in the banking industry?
The Federal Reserve is NOTHING but a MASSIVE moral hazard.
Period.
Arguing a raise in the FDIC at this point is absurd.
And further, fuck Alan Greenspan, the asshole wrote a HUGE essay about THE EVILS OF FIAT and how GOLD WAS THE ONLY PROTECTOR OF THE PEOPLES WEALTH AGAINST STATIST INTERESTS.
And where did he go with that thought?
:rolleyes:
Look, he was right.
The concept of the FDIC=Moral Hazard is a giant fucking "No Duh" to anyone with half a brain. The fact that Greenspan even felt the need to say it is a joke. ESPECIALLY given his tenure as Reserve Chairman. WTF?
Man, honestly i don't even care which way it goes.
I just find it laughable that suddenly everyone is all for standing firm on principle with regards to banking legislation.
Where the fuck was everyone before this crisis?
:(
If I opened it now would you not understand?
http://www.ronpaulforums.com/showthread.php?t=160593
sums things up as I see it pretty succinctly.
I also like this video with Jim Rogers:
http://www.youtube.com/watch?v=5ZQs3anwN0I