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Article: Deposit insurance reform--when half a loaf is better.(United States Federal Deposit Insurance Corp. report)(Statistical Data Included)
- Article from:
- FRBSF Economic Letter
- Article date:
- May 10, 2002
- Author:
CopyrightCOPYRIGHT 2002 Federal Reserve Bank of San Francisco. 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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When it comes to compromise, we can take comfort in the old saying, "half a loaf is better than none." But when it comes to legislation on deposit insurance reform now before Congress, that old saying takes a new twist: "half a loaf is even better than a whole loaf" Why? Because while "half of the loaf" contains provisions that could contribute to better risk-based pricing of deposit insurance and better protection for the deposit insurance fund, the other half contains provisions that could exacerbate the moral hazard problem inherent in the deposit insurance system.
This Economic Letter reviews the major provisions of the legislation and explains which ...