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The FDIC Should Act Like a Real Insurer

Silicon Valley Bank’s spectacular failure demonstrated a fatal flaw in the U.S. system of deposit insurance: The Federal Deposit Insurance Corp.’s coverage limit of $250,000 appears insufficient to prevent bank runs. But raising or eliminating this cap, as some commentators suggest, would create incredible moral hazard. Instead, the FDIC should reduce risk like an insurer would, by pricing it and spreading it around.

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