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19. In the past few weeks, we have seen the Federal Reserve and Treasury guarantee deposits of
all sizes at two
banks that failed in order to minimize the risk of contagion to the entire system. Some politicians
have criticized these tactics, saying that they amounted to a governmental bailout of the banks.
They argue that under a capitalistic system the markets should be allowed to work and that
presumably sophisticated depositors (those with more than $250.000 on deposit) should bear the
risk of bank failure.
Do you agree? Was this a bailout? Were the depositors all sophisticated? Comment in detail.

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19. In the past few weeks, we have seen the Federal Reserve and Tr.pdf

  • 1. 19. In the past few weeks, we have seen the Federal Reserve and Treasury guarantee deposits of all sizes at two banks that failed in order to minimize the risk of contagion to the entire system. Some politicians have criticized these tactics, saying that they amounted to a governmental bailout of the banks. They argue that under a capitalistic system the markets should be allowed to work and that presumably sophisticated depositors (those with more than $250.000 on deposit) should bear the risk of bank failure. Do you agree? Was this a bailout? Were the depositors all sophisticated? Comment in detail.