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Article: Federal reserve lending to banks that failed: implications for the Bank Insurance Fund. (includes related article)
- Article from:
- Federal Reserve Bank of St. Louis Review
- Article date:
- January 1, 1994
- Author:
CopyrightCOPYRIGHT 1994 Federal Reserve Bank of St. Louis. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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DEBATE THAT LED TO PASSAGE of the Federal Deposit Insurance Corporation Improvement Act (FDICIA) in 1991 focused on changes in public policy to reduce losses of the deposit insurance funds. One aspect of public policy subject to such scrutiny was lending by the Federal Reserve to troubled banks. A report prepared by congressional staff indicated that over 300 of the banks that failed in 1985-91 were borrowing from the Fed when they failed, and that 90 percent of the banks that borrowed for extended periods of time eventually failed.(2) Other evidence caused the authors of that congressional staff report to conclude that Fed credit extended the life of borrowers that ...