Only for individuals with < $250k in assets in that bank. It also has knock on effects of making banks compete to provide the highest rate of return to creditors (since the risk to individuals is basically zero, as you pointed out). This leads to banks taking riskier and riskier bets in search of those returns, because if they don't then their users will inevitably swap to one that does.
I wasn't in the US, and during that financial crisis the equivalent government mechanism to insure peoples' savings failed because of the amount of people requesting it to pay for their livelihood.
To this day people prefer stuffing cash under their mattress than putting it in a bank, because they don't trust the banks or the government to give them their cash back.
If it's FDIC insured, the difference is just some paperwork if things go under isn't it?
Only for individuals with < $250k in assets in that bank. It also has knock on effects of making banks compete to provide the highest rate of return to creditors (since the risk to individuals is basically zero, as you pointed out). This leads to banks taking riskier and riskier bets in search of those returns, because if they don't then their users will inevitably swap to one that does.
I wasn't in the US, and during that financial crisis the equivalent government mechanism to insure peoples' savings failed because of the amount of people requesting it to pay for their livelihood.
To this day people prefer stuffing cash under their mattress than putting it in a bank, because they don't trust the banks or the government to give them their cash back.