Radical ideas on deposit insurance

Raghuram Rajan proposes doing away with deposit insurance for large banks.  I can think of few more effective ways of eliminating large commercial banks.

On another note, I heard on the grapevine (i.e. this may not be accurate) that the FDIC is not allowing new banks to be chartered unless the the new bank is willing to buy the assets of an old bank.  If this is true, it is such a total perversion of market principles, that maybe the FDIC really is an important part of the problem.  If the truth is that the FDIC and its fellow regulators have let the banking system deteriorate to such an extent that they can’t afford to allow new, sound banks to form, then maybe we are better off doing away with the FDIC and should allow the NCUA to be the only insurer of deposits.

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