The EU bailout for Irish banksfailed to quell financial markets. Borrowing costs for Portugal, Spain and others continue to rise, because structural problems created by the euro and single European market remain unaddressed and more crises are inevitable.
In the United States, banks engage in dollar-denominated deposit gathering and lending. The smooth functioning of the banking and payments systems are guaranteed by the Federal Deposit Insurance Corporation, the Treasury and Federal Reserve.
When banks fail, the FDIC makes good on deposits up to $250,000 by subsidizing mergers with healthy banks.
If banks are too big to be merged-for example, the recent Citigroupand Bank of America rescues-the Treasury and Federal Reserve can step in. Such extraordinary measures are possible, because the Treasury can issue dollar denominated bonds and the Federal Reserve can print dollars. The latter was critical during the recent crisis.
In the EU, individual member states regulate and guarantee the banks that take deposits and lend in euro. The Irish government guarantees covers all liabilities-not just deposits up to $250,000.