The only happy people? Conservative supporters dusting off their badges?

When you think about it, what its really telling us is that governments, or at least the government of this particular country, do not have enough money to bail us out of this one. And that is scary. That is going to lead to debt deflation on a grand scale, don’t you think?

Deposit insurance is creates a severe moral hazard.

I believe it the free market. But I also believe in market distortions.

In the case of retail banking there is an information asymmetry as retail depositors cannot accurately determine the risk of their deposits.

For this reason regulation can be justified even from a free market perspective.

I am told they now take less than a week in normal cases, but their idea of “normal” is more constrained than what consumers might think is normal. I have been told (any real bank lawyers welcome to correct me if wrong) that matters get hairy when there has been fraud by management (I assume the notion is that that would encourage fraud if they made payout easy in those circumstances). I know you will have problems if there is large scale embezzlement (this happened to a buddy of mine with a bank in Illinois. I think he did get his money back in the end, but it was a long process).

There was a ton of fraud in the failed S&Ls; dunno how much of the slowness in payment then was standard practice vs. fraud vs. being overwhelmed with by the amount of activity.

It’s been a few years since I have been in Oz, but when I was there, the RBA let the banks charge customers a ton of fees in return for keeping them on a pretty short leash (ANZ’s recent woes notwithstanding). I would imagine their view is tight supervision obviates the need for deposit insurance.

And (at least as of then) there weren’t all these dopey securitization products we dreamed up in the US (although like Manley, if you had an overly aggressive broker, you could still get yourself in trouble by buying US instruments). Those reduced bank market share in favor of securities firms.

As readers know, I think the US distaste for regulation is way overdone. It amazes me the job the business media has done in fostering that idea. Of course, you need reasonably high caliber people in regulatory positions for that to work, and regulation appears to be more popular and effective in countries that are less plutocratic than the US (I think it may have been Tyler Cowen who posited that the reasons Europeans chose to consume more government than Americans do it that Europeans are better at government).

To your point re: speed of recompense by the FDIC-I recall that this can elongate out to 1.5 years (from the S&L meltdown in the early ’90’s)

btw, we don’t have any deposit insurance here in Australia…

CrocodileChuck