Monday, 16 November 2009

Why deposit insurance is not free market

Deposit insurance relies on the taxpayer being forced to compensate depositors who have failed to bank at a reliable institution. This is not a free market principle because others are being forced to suffer for your mistakes.

In a free market it is not my fault if others fail and I would suffer no consequence. Deposit insurance is a subsidy like any other and is anti-competitive.

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