An FDIC-style guarantee is only as good as the finances of the country making the guarantee. If, God forbid, this situation deteriorates significantly in the near future there will likely be at least one Irish bank filing for bankruptcy. If that happens, the Irish government will be forced to make the difficult choice of investing public finances to rescue private investors.
Take, for example, the Anglo-Irish bank, which as of March 31, 2008 held 54.5 billion in customer deposits and appeared to be on the brink of insolvency. If the Irish government were forced to insure every single deposit it would spend 29% of its GDP bailing out a single banking institution. Now, it may well be that Irish banks will be saved by a mass influx of new depositors, which will guarantee that Anglo-Irish and other similar banks have the capital assets to survive a prolonged recession, but an equally plausible scenario is that another enterprising country will guarantee its depositors and Ireland will be left with very few new depositors. In the meantime, the country has all but signaled that it will be insolvent in the event of a bank failure.
By pushing for FDIC insurance for all depositors you’re taking a very real economic problem with long-term consequences and transforming it into a potentially apocalyptic catastrophe that could mean a U.S. government default. You might decry bank nationalization as socialism, but I’d argue it’s a much more reasonable solution than risking the financial solvency of the entire country. I mean, you’re essentially daring investors to gamble that the U.S. government doesn’t have the wherewithal to back up such an insurance scheme. That’s hardly what I’d call responsible governance.