System of taxpayer-guaranteed federal deposit insurance

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Federal Deposit Insurance

Some economists have suggested that we replace our system of taxpayer-guaranteed federal deposit insurance with a requirement that banks obtain deposit insurance from private insurers. They suggest that because private insurers would have their own funds at stake, they would—in contrast to the Federal Deposit Insurance Corporation (FDIC)—charge deposit insurance premiums reflecting the banks' actual risks and hold large reserves of funds to draw on if insured banks were to fail.

Some economists argue that society would ultimately be better off on net if federal deposit insurance were eliminated. Are you in favor of the FDIC? Why or why not?

Reference no: EM13830768

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