Briefly explain what FDIC is and the function it performs for the banking system. Then explain how it creates a moral hazard. Now suppose a world without deposit insurance, what are some of the mechanisms that would arise to “punish” bank managers who acted irresponsibly? Now think about how the likelihood of a major economic depression would change if federal deposit insurance were eliminated. Explain.

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FDIC The Federal Deposit Insurance Corporation FDIC is a United States government corporation which ... View the full answer