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  1. Posted by ih8edjfkjr | December 3, 2012 at 10:02 AM

    Do I correctly understand this argument to be that the FDIC should extend TAG so that the FDIC doesn't stop getting used to taking regular, small losses on bank guarantees, which better prepares them for less frequent but larger losses on TBTFs? I have no concerns here.

  2. Posted by Stoopid | December 3, 2012 at 1:35 PM

    It seems we think of banks in two respects – 1) as facilitators of our personal transactions via payment systems and 2) as aggregators and allocators of capital. The vast majority of the American public has no understanding of #2 and would never consider their checking account a loan to the bank – hence the focus on "safety". ____What they do not understand is that in large part, the bank does not pay them for their loan in the form of interest (or very much of it), but rather in the form of providing the services of #1 above, so 1 and 2 are currently conflated. We should simply make the implicit explicit by forcing banks to charge for #1 and to force banking customers to choose whether their deposit (x) sits in a trust-like account risk (other than inflaction) and interest free or (y) is considered a risky loan to a bank and is paid interest for that risk. If you choose safety, great