FDIC
From Recessipedia
The U.S. federal government created the Federal Deposit Insurance Corporation or FDIC in 1933 to stop a series of economically destructive banking panics by guaranteeing bank deposits up to $2,500.[1] The institution has largely relegated so-called noisy bank runs, where retail depositors queue up to withdraw their money in cash, to history. It has not, however, stopped so-called quiet bank runs where creditors refused to roll over short term lending to distressed banks. Quiet runs played a major role in the Panic of 2008.[2]
The FDIC has also been criticized for increasing moral hazard (risk-taking) by not charging banks, especially riskier banks, a high enough premium in exchange for insuring their deposits.[3] The general consensus appears to be that the institution is a wash economically: it saves Americans from noisy bank runs but does little or nothing to prevent systemic crises and may actually help to foment them.[4]
Notes
- ↑ "History of FDIC": http://www.fdic.gov/about/history/index.html; http://www.cbbwi.com/fdic.htm.
- ↑ "Are We in a Deposit Guarantee Arms Races?" Rogue Economist (October 21, 2008): http://rogueeconomistrants.blogspot.com/2008/10/are-we-in-deposit-guarantee-arms-race.html.
- ↑ Viral Acharya and Matthew Richardson, eds. Restoring Financial Stability: How to Repair a Failed System (Hoboken, N.J.: Wiley, 2009): http://www.amazon.com/Restoring-Financial-Stability-Repair-Finance/dp/0470499346/ref=sr_1_1?ie=UTF8&s=books&qid=1246921326&sr=1-1
- ↑ Robert E. Wright and Vincenzo Quadrini, Money and Banking (Flat World Knowledge, 2009): http://www.flatworldknowledge.com/pub/1.0/money-and-banking/economics-financial-regulation/great-depression-regulatory-fa.
