Would depositors need to fear losing money

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Reference no: EM131303293

Economist Laurence Kotlikoff of Boston University has proposed that the banking system be reformed so that all banks would become "limited purpose banks." As he explains: [Banks] would simply function as middlemen. They would never own financial assets or borrow to invest in anything. . . . [Limited purpose banking] effectively provides for 100 percent reserve requirements on checking accounts.

This eliminates any need for FDIC insurance and any possibility of traditional bank runs....

Why would 100% reserve requirements on checking accounts eliminate the need for FDIC insurance? Would depositors need to fear losing money if their bank failed?

Reference no: EM131303293

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