While simply "eliminating" deposit insurance is not a wise prescription for reform, show me an economist who denies that it can encourage excessive risk taking, and has done so in fact in many instances, and I'll show you a poor economist. 1/n https://twitter.com/sam_a_bell/status/1326970727883563021

For a survey of the evidence by some very good economists, including @ademirguckunt see this now classic World Bank study: https://openknowledge.worldbank.org/handle/10986/8226

Deposit insurance began in this country (only the second in the world to adopt it nationally--after Poland if I recall correctly) as a way to shore-up a fundamentally rotten unit banking system. Even then the "moral hazard" problem it posed was well-recognized.

FDR had long opposed it for that reason, though he finally signed-off on it to get other reforms he wanted through.

It began and has been defended as a way of safeguarding unsophisticated, small depositors. How many such do you know who need coverage up to $250,000--sometimes for multiple accounts! At very least reforms aimed at restoring the scheme to its original goal should be considered.

That would at least restore some role for market risk-avoidance into the system. As I used to teach my Money and Banking students, something is badly amiss when savvy people spend less time choosing which bank to put their savings in than they spend shopping for a new cellphone!

So, let's not disqualify @judyshel for having written critically about deposit insurance. If we did, we'd have to rule-out a very long list of good people for positions at the Fed, including (I very much suspect) some serving there today!