[DenisM]

> We've all seen in the past on how well "financial oversight" worked

It worked remarkably well - no consumer lost their deposits to a bank failure. The fact that banks lent out too much money had no impact on consumer deposits, thanks to oversight.

[wuliwong]

What if banks tend to lend out too much money because of the deposit insurance? This could have other, unintended consequences beyond the narrow scope of your comment.

[ls612]

It’s a nice theory, but unsupported by evidence. In the US since the FDIC was set up there have been far fewer bank failures than there were before then. In fact, having that oversight short-circuits the mechanism that makes bank runs happen, since getting your money back is no longer a function of your place in line.

[ionised]

> The fact that banks lent out too much money had no impact on consumer deposits, thanks to oversight.

I like how you're trying to make like the financial crash was no big deal because this 'oversight' worked in this narrow context.

I wonder if you'd claim that the banks lending out too much money didn't have absolutely catastrophic effects on the economy in general and by association, millions of people's livelihoods around the globe.

[sp332]

That sounds like an argument for more regulation, not less. If there were less regulation, all that stuff would have happened and depositors would have lost their money.

[ionised]

I agree. I'm a big fan of heavy regulation, especially for industries that can, and frequently do, ruin millions of lives with their avarice.

[gridlockd]

That had nothing to do with oversight and everything to do with the fact that the government can just print the money to save a bank - and it did so. That expectation itself caused reckless behavior of the banks - and it still does. People just don't fully grasp the consequences.

Also, you may say this "worked" in the US, but other countries didn't get quite so lucky playing that game.

[mountainofdeath]

The government doesn't print money to catch failing banks, at least not usually. For standard bank deposits, banks pay a fee to FDIC as a percentage of their assets just like any insurance policy.

Keep in mind, it's to the bank's advantage to remain solvent at all costs. An insolvent bank will be liquidated and shareholders are left empty handed. Between the FDIC insurance and the liquidated assets is how these things are paid out.

[navigatesol]

>That expectation itself caused reckless behavior of the banks - and it still does. People just don't fully grasp the consequences.

What most people don't grasp is just how regulated the financial industry is.

Silicon Valley loves taking risks (and failing!), but when a bank does it it's unacceptable? This stuff happens in a capitalist economy. I mean, it's not like it was "the banks" in a vacuum. It was governments, mortgage brokers, builders, house-flippers, your neighbour, speculators...everyone benefited from the wealth effect of cheap money and rising home values. Until they didn't; then it became the banks' fault.

[gridlockd]

> Silicon Valley loves taking risks (and failing!), but when a bank does it it's unacceptable?

No, what's unacceptable is the government bailout "guarantee" you get from being "too big to fail". That's not "taking a risk", that's not "capitalism", that's gambling with someone else's money.

I will agree though that you can't blame the banks for an environment where they're effectively pushed to lend recklessly, that's the result of monetary policy.