I am not sure about this one. Anyone who wants to put his savings in a money market mutual fund can already do so. OTOH, many people, myself included, want to keep funds in liquid form without worrying about valuation. I have a lot of money in several accounts at a small regional bank. The accounts are less than $250,000 each. I am happy with the situation and do not want to see it change.
I have investments in money market mutual funds, and I also own treasury securities directly. I just don't see how your proposal helps me.
Further, who will lend money to businesses and consumers in your system. How will they be funded?
What I think should be done is to adopt a less ad hoc and more structured insurance system How about this: for the first $250K, just like now., fully insured, the next 250, 99%, 500 to 1 million 98%, 1 to 2 mil 97%, 2 to 5 mil 96%, 5 to 10 mil 95% over 10 90%. FDIC should allow large depositors to buy back the deductible for a premium based on the yield on the deposit.
My checking account earns interest. Riskier banks will pay higher rates than safer banks to retain any kind of deposit. But, I am just throwing out ideas not laying down the law. I think the availability of insurance will give regulators information as to perceptions of risk and will mitigate or prevent runs.
Prof Kotlikoff - Can you point to other experts, like yourself, that support your idea of transforming all financial institutions into mutual funds?
A return to Glass Steagall and putting limits on what interest banks can pay, which i know you hate, would insure more safety to the core banking system. Right?
I am not sure about this one. Anyone who wants to put his savings in a money market mutual fund can already do so. OTOH, many people, myself included, want to keep funds in liquid form without worrying about valuation. I have a lot of money in several accounts at a small regional bank. The accounts are less than $250,000 each. I am happy with the situation and do not want to see it change.
I have investments in money market mutual funds, and I also own treasury securities directly. I just don't see how your proposal helps me.
Further, who will lend money to businesses and consumers in your system. How will they be funded?
What I think should be done is to adopt a less ad hoc and more structured insurance system How about this: for the first $250K, just like now., fully insured, the next 250, 99%, 500 to 1 million 98%, 1 to 2 mil 97%, 2 to 5 mil 96%, 5 to 10 mil 95% over 10 90%. FDIC should allow large depositors to buy back the deductible for a premium based on the yield on the deposit.
WS
Interesting thinking. How does making large depositors buy back the deductible for a premium based on the yield of the deposit make banks more secure?
Aren't most deposits over $250K held as operating cash for companies or traders?
My checking account earns interest. Riskier banks will pay higher rates than safer banks to retain any kind of deposit. But, I am just throwing out ideas not laying down the law. I think the availability of insurance will give regulators information as to perceptions of risk and will mitigate or prevent runs.
Prof Kotlikoff - Can you point to other experts, like yourself, that support your idea of transforming all financial institutions into mutual funds?
A return to Glass Steagall and putting limits on what interest banks can pay, which i know you hate, would insure more safety to the core banking system. Right?