Banks shouldn't be required to pay for deposit insurance from the federal government if the federal government isn't going to make good on their claims.
If you pay your premiums every year and your car gets totalled, is your insurance company "bailing" you out at others' expense for making good on your policy?
Hardly.
That’s a definition of corporate welfare.
Only if welfare recipients pay money into the welfare fund.
If they want to invest in risky venture, that’s fine on their dime.
It's precisely the opposite.
It's clear that most people who post on these threads do not know what credit derivatives are.
But when I take a deposit as a bank, I agree to pay the depositor interest and I also pay deposit insurance.
I use the deposited money to make a loan, and I compete with other banks for the business.
By being involved in the lending business at all, I am taking on risk. And it is necessary risk taking for the economy to function.
Thoise risks are generally defaults on loans and interest rate movements.
I can buy insurance (that is, credit derivatives) on interest rates in order to reduce risk.
They just should not expect me to cover their losses.
They should expect the people who sold them insurance to pay their claims.
I guess you think that some parts of the economy should get to be “too big to fail.”
You are conflating depositors with everyone else. Regular Joe depositors (who should be covered by FDIC) aren't in a position to tank an entire economy vis-a-vis derivative swaps.
Secondly, you are comparing apples to oranges by comparing car insurance to FDIC insurance, because the big banks don't need to nor do they have to engage in derivative swaps.
IOW, why should insurance companies pay for someone totaling their car if they were driving it at 175 mph? If banks want to go pedal to the metal, then they can do so on their own, but if they car and burn they shouldn't ask others to pay when they take out multiple cars and run people over when they were driving at 175 mph.