This article on Bloomberg.com is amazing in its lack of understanding of simple ethics and economics and its desire to exploit banking failure fears currently inflamed due to IndyMac and other recent failures. The article describes a bank that is run by former FDIC officials that allows wealthy people to distribute their deposits among many different banks and therefore take advantage of the $100,000 deposit insurance provided by the FDIC. Somehow, the author of the article, Mr. Evans, has spun this into a nefarious thing. Apparently if you're rich you shouldn't be allowed to act rationally and divide your deposits amongst different institutions so that you can take full advantage of the insurance. Mr. Evans clearly believes that if you have more $100,000, then you have to deposit only at one bank and let the rest be subject to failure risk.
Have you ever heard anything more absurd?
The article takes to task former FDIC officials for having the foresight to recognize that people who want to secure more than $100,000 in cash deposits with one institution will not want to deal with the paperwork hassle of keeping track of many different deposits. They created a firm called Promontory Interfinancial Network in order to provide this exact service.
It's a genious idea that I wish I thought of because it's so simple and will clearly be in demand.
These officials should be celebrated for their foresight and ability to innovate in creating another great American business.
Mr. Evans should be fired for being an idiot. And his editor that allowed this story to run because it strums current fears about deposit safety in the aftermath of IndyMac and Lehman Brothers, should be fired as well. This is bad journalism at it's...um...worst.