Banks regularly come together to create commonly owner industry organizations to handle stuff like this. Of course, these orgs are often very inefficient and produce bad products. But it's a lot better than nothing.
I actually love this example because it's not just bad products in banking. It's profiteering in the most literal sense.[1] Being government backed gives you the pleasure of taking risks on the backs of taxpayers. Why wouldn't you?
Conversely, from speaking with friends doing BI at insurance companies, I don't think there is often more than a single percent of margin in insurance. Not a lot of room to take further risks without some backing.
If the government steps in to overcome the risk, we open the door to profiteering, same as our current banking disaster. And if they don't, then insurance companies will exit the industry, since the risk isn't justified.
[1] Profiteering: The act of making an unreasonable profit not justified by the corresponding assumption of risk.
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Banks regularly come together to create commonly owner industry organizations to handle stuff like this. Of course, these orgs are often very inefficient and produce bad products. But it's a lot better than nothing.
I actually love this example because it's not just bad products in banking. It's profiteering in the most literal sense.[1] Being government backed gives you the pleasure of taking risks on the backs of taxpayers. Why wouldn't you?
Conversely, from speaking with friends doing BI at insurance companies, I don't think there is often more than a single percent of margin in insurance. Not a lot of room to take further risks without some backing.
If the government steps in to overcome the risk, we open the door to profiteering, same as our current banking disaster. And if they don't, then insurance companies will exit the industry, since the risk isn't justified.
[1] Profiteering: The act of making an unreasonable profit not justified by the corresponding assumption of risk.
I think you might be a bit biased and talking here about US banks after the US deregulation disasters (still ongoing!). There are non-US banks.
You're right I'm talking about the US. Are banks not government backed in the EU?