I would like to offload responsibility and consequences to the individual parties. Regulated industries have a cosy relationship with the state and are more likely to receive bailouts and carve out protective moats for their business. If there is a failure in risk management, then the investors (and yes depositors as well) should bare the consequences. Investors are going to be a lot better than regulators to enforce good practices. But you only get there once you stop bailing out every company when things go wrong
I kind of disagree,although it'll all be on case by case basis.
First, in my mind, the original principle of regulation IS the individuals saying "well, THAT sucked... Let's not do THAT again". Otherwise everybody has to make a mistake for themselves and that's inefficient. We need to learn as a society and across generations.
Second, modern life is complex and we need to divide and conquer. Most of us live in Interconnected society strongly dependent on competent work by others. There are some things we should take for granted. In this particular case, if I put basic cash into a basic deposit account that's not designed to give me high yield or differentiated exposure or whatever, then I want regulations and a system to make it so.
There are 10,000% too many regulations that are insufficiently examined and overly prescriptive out there.
But I don't agree that depositors should always pay cost because we are all depositors and we can't all always manage that risk individually and I think we as society mostly said, this is a risk that pertains to all and we should manage it holistically as such.
> In this particular case, if I put basic cash into a basic deposit account that's not designed to give me high yield or differentiated exposure or whatever, then I want regulations and a system to make it so.
If all a company has to do is check the boxes of regulators (which they're good at) and now there is a guarantee that nothing else needs to be done since the bailout is all but explicit. You don't care as a customer. The business doesn't care since it's following the rules. And every decade or so we have a bailout.
Remember that these industries are heavily regulated. And those regulations are always insufficient. Triple A CDO-squared were treated to be as safe as cash according to regulations when they ended up being worth closer to 30 cents to the dollar
I agree. Bailouts are bad because they lead people to ignore risk, especially people who should know better, like investors and people with > $250,000 in a single account. Furthermore, we seem to bail out wealthy parties much more regularly than poor parties... Where is the bailout or simple assistance for people who cannot afford basic necessities or housing due to overall economic conditions? But poor Roku may get a half billion bailout.
