publication . Article . 1990

Deposit insurance reform or deregulation is the cart, not the horse

John H. Kareken;
Open Access
  • Published: 01 Jan 1990
Abstract
This paper, originally published in the spring 1983 Quarterly Review, explains why flat-rate deposit insurance gives financial intermediaries an incentive to take on too much risk. It also discusses the purposes of deposit insurance and some ways reforms might serve those purposes. Three possible reforms are discussed: abolishing the insurance and requiring depository institutions to either hold safe assets or mark to market, reducing the deposit ceilings for insurance, and risk-adjusting the insurance premia. ; Originally published in Quarterly Review, Spring 1983
Subjects
free text keywords: Deposit insurance

!New York State Legislature, Assembly, Journal (Albany, New York: 1829), p. 439.1 am indebted to Carter H. Golembe for calling the passage to my attention.

2It is not easy going, but see Douglas W. Diamond and Philip H. Dybvig, "Bank Runs, Deposit Insurance and Liquidity," Journal of Political Economy 91 (June 1983): 401-19.

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publication . Article . 1990

Deposit insurance reform or deregulation is the cart, not the horse

John H. Kareken;