> They should've just lied, and said that they'd do it for another bank, if there's a need to; this would've stopped any fear of a run, and thus stop the run before any more dominos collapse.
While this may have prevented FRB, that's a very dangerous game to play should the bluff get called.
I'm strongly opposed to the idea that those given the power and authority to control or markets, as best they can, should world that power by lying to us. Lying because they think it's the best thing for us or because they don't think we can handle the truth is a slap in the face to the very trust that empowered them to begin with. Our leaders do this often and it's such a slippery slope - it either works and you feel emboldened to lie again or it backfires and we're all worse off.
The thing is, this white lie is what keeps confidence levels high, which is what prevents the run.
By merely suggesting that a bank can fail, and that the FDIC is not going to bail out high depositors, they paradoxically _cause_ the run. After all, the people who took the money out just merely redeposited it back elsewhere (that they trusted more).
The white lie is better than a loss of trust which lead to an actual problem. And the FDIC could actually lie without lying by putting in vague words and misdirect people - such as saying things like "if necessary". In fact, people in society today believe plenty of white lies already - what's one more?
While I totally agree that is how the system is designed, that's also the fundamental issue I have with it.
If we have such a fragile banking system that those in charge are expected to lie to us to keep people from seeing the fragility, we have to rethink the system.
> In fact, people in society today believe plenty of white lies already - what's one more?
That feels like a bit of a slippery slope, selling people on one lie shouldn't justify telling another. It also means first defining what a white lie is, and who gets to know the truth to decide whether it's acceptable or not.
While this may have prevented FRB, that's a very dangerous game to play should the bluff get called.
I'm strongly opposed to the idea that those given the power and authority to control or markets, as best they can, should world that power by lying to us. Lying because they think it's the best thing for us or because they don't think we can handle the truth is a slap in the face to the very trust that empowered them to begin with. Our leaders do this often and it's such a slippery slope - it either works and you feel emboldened to lie again or it backfires and we're all worse off.