Consumer relationships are about trust
It doesn't matter that in the first place it was government intervention that brought down the now gone financial institutions, to the man on the streets, private businesses are ones that can't be trusted. This loss of trust in private institutions has seen the citizenry flock to government backed financial firms.
Like I said, this despite the truth. Note Walter Williams, 'The blame for our current financial mess rests with government, with the major player being the Federal Reserve Board keeping interest rates artificially low and the congressional and White House market interference in the name of more home ownership. In the clamor for more regulation over our financial institutions, has anybody bothered to ask whether people in government know what they're doing?'
Take India as an example, to see this shift in trust. The State Bank of India is now flush with deposits made by people who have pulled it out of private banks they used to bank with. Consumers have shifted tens of billions of dollars to India's state-run banks amid the bailouts of the world's most sophisticated financial institutions and concerns that global problems could infect India's private-sector banks. The fallout? State-owned State Bank of India is lending like the global credit crisis never happened as it looks for places to park billions of dollars in new deposits. Its is on a lending spree, cutting interest rates on loans, snatching customers from competitors and doing its part to prevent India from getting stuck in the global slowdown.