[eru]

What do you want to say? That FDIC forces institutions to be large? Or that FDIC is a large institution and that we need them?

[pc2g4d]

My point was that banks are still useful because they get federal deposit insurance, while Silicon Valley startups apparently don't.

[ensignavenger]

I don't see any reasons why a silicon valley startup couldn't. Lots of small bank startups sprout up all over the country. Also, Simple.com was a startup (they are now part of a very large bank) that got FDIC insurance through a partner bank.

[prostoalex]

In theory it shouldn't be too hard for a private insurance company to develop a similar product if there was enough interest from startups.

[setpatchaddress]

I'd love to hear you expound on that theory. I find it really unlikely that anyone would trust a private corporation in that role.

[prostoalex]

Private corporations already underwrite bonds (and related debt products like pensions, corporate loans, annuities or mortgages). A deposit in a bank is not completely different from a customer loaning money to the banking institution (at low or zero interest) in exchange for on-demand funds availability.