John R Walter Federal Deposit Insurance Corporation

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John R. Walter argues that banks are fragile companies and there was no need for the government to provide assistance through the implementation of the Federal Deposit Insurance Corporation (FDIC). I do not agree with this because banks provide any individual with the financial ability to continue pursuing their dream as long as they meet certain requirements for a loan. This is an acceptable prerequisite to have since not all individuals are financially capable of maintaining the payments needed for the amount of money they borrow. Also, not all adults are responsible or make appropriate choices and banks need to have the assurance they will get their money back to continue to lend to other individuals.
One of his arguments is that the deposit insurance augmented the profits …show more content…
It appears that there was an increase of banks being formed sue to the decrease of capital required to form a new bank. Afterwards, these new banks were seen as inadequate financial or managerial resources, but instead this change gave more individuals the possibility to get lent money that would not have been considered previously for a loan with the limited number of banks they had in the area. This change resulted in an "annual rate of growth of GDP averaging over 6 percent for the period (Walter)". Banks were not being protected, instead they were given the opportunity to stabilize the economy and assist local entrepreneurs in their business ideas.
John also argues that there is an undercut of the market that caused supervisors to close troubled banks quickly. "The formation of state deposit insurance systems in a number of states may also have contributed to a perception of safety and allowed the rapid
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