|
|
Article: Can deposit insurance increase the risk of bank failure? Some historical evidence.
- Article from:
- Federal Reserve Bank of St. Louis Review
- Article date:
- May 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)
|
LOAN LOSSES ASSOCIATED WITH declines in energy and agricultural prices, and the collapse of commercial real estate markets were the proximate cause of the high number of bank and savings and loan (S&L) failures of the past 12 years. Many researchers also blame government policies, however, such as restrictions on branch banking and limitations on the services that banks and S&Ls may offer. Such restrictions hamper diversification, thus leaving depository institutions particularly vulnerable to downturns in the regions which they serve.
Deposit insurance has probably been the most criticized government policy related to bank and S&L failures. Many economists ...