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Is FDIC insurance good or bad for America

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Reference no: EM133037071

Question - The Federal Deposit Insurance Corporation was created in 1933 to protect the deposits of individuals in banks. It now guarantees deposits up to $250,000. This makes individuals feel save and prevents individuals from loss due to local bank insolvency, but it also discourages oversite of bank behavior by depositors and exacerbates banking Moral Hazard problems. If bankers take on risk and make money they keep it. If bankers lose money they get a tax payer bailout. The Basel Accords allow banks to engage in 90% leverage making insolvency in a downturn likely. Is FDIC insurance good or bad for America?

Reference no: EM133037071

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