Peter Schiff: "Deposit Insurance For Banks Is A Bad Idea"

Video - Peter Schiff on the FDIC's Deposit Insurance - Oct. 11, 2011

Runs 2 minutes.  This is not an issue you hear discussed very often, but Schiff makes some valid points.

Comments

[ETM]

I have to disagree, but it is an interesting discussion.

I don't think there is anything wrong with the FDIC program, the problem is that when banks need to call upon that insurance, they are not PROSECUTED for malfeasance or fraud. The FDIC is about CONSUMER protection, not bank protection. It's removing the consequences for the banks that causes the real problems.

[Rob]

The FDIC is almost broke so where do the funds for depositor payouts come from when the fund runs completely dry uh? Oh that's right - the tax-payer again. So the people have to pay again for the stupid investment decisions made by the banksters and people who over-extended themselves - Nice

[Marc]

I agree with Peter 100%, and I have been preaching this for years. With the FDIC in place, there is no incentive for people to research and find good, strong banks. People shop for the highest interest rates without any regard to the banks' soundness. This gives the bank no incentive to be smart about their investment policies. In fact, it's often the banks that are doing the dumbest things and have the low ratings that are offering the highest interest rates. And those banks attract the most customers and become the largest banks. You have only to look around at what's happening in the banking industry for ample evidence.

If there were no government safety net, that vacuum would be filled by the private sector just as it was in the insurance industry. You can argue all day that the government should be involved, but if you look at what's happening around us, you can see it's a bad idea. The more the government got involved in the mortgage industry and Wall Street, the worse things got. And look where we are now.

Look at the track record of the insurance industry vs the banking industry, and it becomes very clear that the private sector does a much better job of making money, and of protecting consumers.

The trouble with socialism is that it's persuasive in it's arguments, and moves in slowly. People readily accept it, little by little -- like the FDIC -- because it feels good and safe. Before you know it, we have a government-owned auto company, government-owned banks, and, perhaps, a government-owned health care industry.

It will never stop until people wake up and realize we're much better off without that particular safety blanket.

[Miguel Grande]

The Schiff family is part owners of the Federal Reserve. Enough said.

99% RULES!!

[Inurface]

Marc, are you for real. Banks and bankers should be under lock and key. The less regulation they have the more they push the envelope. Look what happened. The wolfs are running the hen house.
You must be a banker, instead of a gun you have a pen.

[Josie]

FDIC is an illusion to create comfort in what would otherwise be mass hysteria. Think of it. BAC customers would already have run on that bank but for, among other things, the FDIC "backing" the deposits. 5/3 too in '09. The FDIC simply does not have the funds. If it were a private insurance company, it would be insolvent many times over. The banks' (our) premiums are just a small fee for the overall illusion.

[Marc]

Inurface,

No, I'm not a banker. In fact, I don't particularly like banks or the banking system. But I dislike government more.

I think you will find that free markets would take care of all the issues people have with banks. We already have rules and laws regarding contract rights and fraud. The problems occur when you have a government that comes in and short-circuits the system by bailing out the banks that have been the bad players. They should be allowed to fail.

There are good banks out there, run by good people who do the right thing, given the system as it is. And there are private rating agencies that any consumer can use to help you find those banks. You don't need a daddy/government agency to look after you. You can look after yourself, and I suggest you learn to, and stop looking to government to do it. You will be sorely disappointed.

The banks aren't your friend, and the government isn't your friend. When they get in bed together, you end up with what's happening in the economy right now.