I understand bank runs are unwanted but why does the US have FDIC insurance when everyone knows that's not enough at $250k (or at any limit for that matter).
Why did the Fed not explicitly backstop depositors in 1991 bank runs or any other subsequent bank runs?
Wouldn't this be a moral hazard for the banks if Fed explicitly (or implicitly) guarantees no bank run? That is, why wouldn't a bank not just invest all deposits in Bitcoin or stock market or NFTs (or any risky assets)?
Would appreciate any good explanations!
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