Federal Deposit Insurance Corporation

> big daddy government says it will step in and protect the management people who make bad decisions and make stupidly risky mistakes and guarantee that they cant fail by subsidizing their overly risky mistakes through redistribution of wealth to the top through bailouts or bailins.
> with that net to catch them and protect them from hitting he pavement if they fall, Moral Hazard takes over and they take the exorbitant risks expecting the net to catch them when they fall.
> the government scheme is a confidence game anyways because they massively underfund the program

>>1579819
https://en.wikipedia.org/wiki/Norwegian_Banks%27_Guarantee_Fund

Like this?
I don't think it's to prevent the bank from failing, though. I think it's there in case the bank does fail, in which case the fund would refund your lost capital.

>>1580294
It's the same thing. Banks largely fail because people make a run on them and demand all of their money at once. People make those runs on the banks because they're afraid their money will be all gone if they don't, which is a self-fulfilling disaster.

If the government says "Hey, be cool, your savings are guaranteed by us", it means that the vast majority of account holders won't make a run on their bank.

The Canada Deposit Insurance Corporation (CDIC) is a Canadian federal Crown corporation created by Parliament in 1967. The CDIC insures Canadians' deposits held at Canadian banks (and other member institutions) up to C$100,000 in case of a bank failure

Most western countries have some form of equivalent concept.

FDIC protections basically prevent the problem from occurring in the first place because of trust. As >>1580487 explained.

>daily reminder: fdic will cover up to 250k each of deposits....until it runs out of funds.

Do you really think bank runs are quarantined events? No it would be systemic in which they would not be able to cover .01% of deposits. Get your money out now. No reason to use a bank to hold more than everyday spending money. You've been warned. See: bail ins

>>1580886
But if the funds are guaranteed, nobody panics and runs down to get their deposits in the first place, preventing the bank runs from spreading.

>>1580886
It's conceivable that a particular bank would experience a run after getting caught performing fraudulent activities. Not likely, but possible.

>>1581391

First, banks can go bankrupt without a bank run. Secondly this could cause other banks to crash as well, because banks loan money to each other any time people transfer money between accounts of different banks, which causes more banks to crash. The FDIC doesn't have the funds to cover all these accounts.

This is where bailouts and the lender of last resort come in. However, this causes big banks to engage in risk-seeking behaviour, they know they will get bailed out if shit goes wrong.

Finally, despite a deposit insurance scheme existing in the Netherlands, the Dirk Scheringa Bank crashed after Pieter Lakeman triggered a bank run by stating DSB was close to bankrupt. Joe Average simply doesn't know what deposit insurance means or does.

Finally Finally, $250k is is not enough to cover many corporate accounts. This can cause corporations to fail after a bank fails, causing huge economic damage. This is also why almost every relevant bank is bailed out if needed.

>>1581426
Presumably if you are storing multiple millions in liquid cash for any real length of time, your accounting department has invested in alternative protection.