Willie Sutton’s European Vacation

I’d like to propose a different interpretation. This interlude again demonstrates the exceptional safe haven qualities of the United States. The FDIC guarantee is simply superior to a deposit guarantee anywhere else. The UK chose not to have a guarantee and that didn’t work out in the pinch (eg Northern Rock). The US has struck the correct balance of guaranteeing only a limited amount of deposit with a scheme of segregated resolution funds paid into by the depository institutions. The Eurozone authorities have been scrambling to recreate a similarly robust, reliable and simple system along these lines. It’s also basic to the US framework that the FDIC has itself resolution authority: it can itself shut down and negotiate sale of an institution.

I honestly do not see a connection between the ability of Cyprus to honor its sketchy deposit guarantee and the US tested system. If anything, this enhances the US’s appeal.