What would be the procedure without the FDIC?

[Knightskye]

If we didn't have an FDIC, what would be the procedure to find out if our money is safe in a given bank?

(I thought about that when Peter Schiff talked about it in his ASC speech):
http://www.youtube.com/watch?v=EgMclXX5msc

[Truth Warrior]

Bank with the EARNED trustworthy ONLY. ;)

[StudentForPaul08]

If we didn't have an FDIC, what would be the procedure to find out if our money is safe in a given bank?

(I thought about that when Peter Schiff talked about it in his ASC speech):
http://www.youtube.com/watch?v=EgMclXX5msc

Well Peter said there would be people who rate the banks I think. Based on how risky their lending is they would determine what banks are the safest. I am petty sure it would be non-governmental though. As it should be.

Also, you would just earn their trust and they would, in the self interest of the banks to make safe loans and behave responsibly knowing that the government will not help them. Would you put an effort in getting A's if the schools just gave them to you? Probably not, and you would not be able to tell the good students from the bad. I am pretty sure most people on here know this concept.

:cool:

[fahayek]

Banks would get private insurance just like you or I. The more risky they are, the higher the premiums would be. VERY VERY VERY simple.

With the implied money guarantee from the FDIC, people don't think to research the banks before they deposit their money. Take away the FDIC and people due thier due diligence. You wouldn't hire a company to cut down an 80ft tree that is 5 feet from your house unless they had insurance.

[Knightskye]

Banks would get private insurance just like you or I. The more risky they are, the higher the premiums would be. VERY VERY VERY simple.

How would you know they had insurance?

Would it be like "VeriSign" on websites where you make purchases?

[angelatc]

If we didn't have an FDIC, what would be the procedure to find out if our money is safe in a given bank?

(I thought about that when Peter Schiff talked about it in his ASC speech):
http://www.youtube.com/watch?v=EgMclXX5msc

Private insurance.

Brokerages routinely carry insurance for the above-the-SIPC-limit cash balances of their customers.

[idiom]

Before the FDIC, you knew your bank was trustworthy because there wasn't a line of people yelling outside it.

The FDIC doesn't keep banks trustworthy, the Federal Reserve does [not do] that and the banks shareholders do that. The FDIC just smoothes the transition when the bank dies.

The FDIC allows you to treat your bank like a utility so only the owners get burned when it fails.

The next question is how do you know your private insurance firm is solvent and will be solvent when the bank goes down. The FDIC can more or less print its own moeny. Can your private insurance firm promise that?

[slothman]

You wouldn't hire a company to cut down an 80ft tree that is 5 feet from your house unless they had insurance.

I think a better analogy is that the FDIC is like a shield around your house and if the tree falls on it it just bounces of the shield.

[trey4sports]

to the OP

lets digress

If there was no FDIC, would their be a DEMAND for "safe" banks?
if so, why wouldnt private entities form and rate banks based on their history and financials ?

short answer: there would be free-market entities who rate banks based on a whole slew of features.

if there's demand, there's supply.

anyway, with a gold standard your dollars would probably just gain value sitting in your wallet or underneath your bed

[idiom]

A Couple of 150 year old banks just failed. How much trust can you earn?

Fractional Reserve banks are inherently unstable. The FDIC allows them to exist without their downsides outweighing their benefits.

[Knightskye]

Private insurance.

Brokerages routinely carry insurance for the above-the-SIPC-limit cash balances of their customers.

Mm. Now it doesn't sound so scary.