[Torie]

The FDIC doesn't make much sense, but your statement is too broad. Merchant banks in Britain without such insurance do just fine. Banks would remain very much in business without FDIC insurance, or with such insurance and circumscibed use. Attending the government guarantee is a huge bureaucracy that monitors bank soundness, and tries to make sure they write down their loans as needed and book adequate reserves. I think I would prefer that insured deposits be used to buy treasury bills or some such, and shut most of the burearcracy down. There would need to be strict requirements though about full disclosure, and the banks should be required to be audited by deep pocket CPA firms.

[Deuce]

I know little about the British system. Can you direct me to anything on the internet or know whether merchant banks take demand deposits and what the reserve ratio is for them how about for other categories of deposits?

There would need to be strict requirements though about full disclosure, and the banks should be required to be audited by deep pocket CPA firms.

These would be substantial improvements, but not far enough as far as I'm concerned. I can't remember when any CPA firm ever gave an early warning sign of impending collapse.