ziggy29
Moderator Emeritus
Agreed. These are two sides of the same coin. If the feds allowed the FDIC to not honor its obligations, the market would have no reason to trust the "full faith and credit" of Treasuries, would it?But that is just wrong thinking.... IF the FDIC does not make a payment on a failed bank... the treasuries that you own will more than likely be worthless... or maybe a couple of cents on the dollar... the practical result is you will be in the same boat either way...
I can only begin to imagine how much worse the recent meltdown would have been - and how many more banks would have failed spectacularly - if savers didn't have faith in FDIC insurance. That many people were "hoarding cash" in savings accounts even as the banks were struggling is testimony to that.