1. Show or hide comments about the document.

  2. Search over the document's text.

  3. Share the document through social networks or e-mail.

  4. After selecting an area on the page.

  5. ...you can:
    copy the text
    share the segment
    comment
    cite the document

Summer 2016
ISSN 0890-913X
Volume 31, Number 2

The Implicit Costs of Government Deposit Insurance

Thomas L. Hogan, Troy University
William J. Luther , Kenyon College
Download Share e-mail
  • << Back to editing
  • Previous version by
  • << Older
  • Newer >>
  • Revert to this one
  • Edit
  • Fullscreen
  • Show comments
  •  
  •  
  •  
  •  
  • Zoom:
     
     
  • Page:  / 13
  •  
  •  
  •  
  • Line spacing:
     
     
  • Word spacing:
     
     
  • Search:FindClose
 
search results
 
 
 
 
 
 
 
 
 
 
 
432
648
1
0
/index.php?action=ajax&rs=GDMgetPage&rsargs[]=2016 Journal of Private Enterprise vol 31 no 2 Summer parte1.pdf&rsargs[]=0
TheJournalofPrivateEnterprise31(2),2016,113TheImplicitCostsofGovernmentDepositInsurance*ThomasL.HoganTroyUniversityWilliamJ.LutherKenyonCollege______________________________________________________AbstractMostpeoplebelievethatthebenefitsofdepositinsuranceprovidedbytheFederalDepositInsuranceCorporation(FDIC)clearlyexceedthecosts.However,agrowingliteraturesuggeststhatthebenefitsofFDICinsuranceareoverstatedwhilethecostsareunderstated.Weaddtothisliteraturebyconsideringtheimplicitcostsofgovernment-provideddepositinsurance.Specifically,weconsiderthecostsarisingfrom(1)animplicittaxpayerbackstopand(2)suboptimalpricing.Theimplicitcostsofgovernmentprovideddepositinsurancearerealeconomiccostsbornebytaxpayers,borrowers,lenders,andcounterparties.Sincesuchcostsareroutinelyomittedfromtraditionalcost-benefitanalysis,moststudiesoftheFDICtendtobebiasedinfavorofgovernment-provideddepositinsurance.______________________________________________________JELCodes:E44,G28,G21Keywords:actuariallyfair,bankfailures,comparativeinstitutionalanalysis,depositinsurance,Diamond-Dybvigmodel,FDICI.IntroductionFewAmericansgivegovernment-provideddepositinsuranceasecondthoughtandvirtuallynoonecallsfortheabolitionoftheFederalDepositInsuranceCorporation(FDIC).TotheextentthattheFDICisconsideredatall,itispoliticallypopular.ItisoftencreditedwithpreventingbankrunslikethoseoftheGreatDepression,andCongresshasincreasedthemaximumaccountbalancecoveredbytheFDICseventimessinceitsfoundingin1933.Withannualadministrativeandoperatingexpensesaveragingjustafewcentsper$100insured,mostpeoplebelievethebenefitsofgovernment-provideddepositinsuranceexceedthecosts.*TheauthorsthanktheCatoInstituteandtheMercatusCenteratGeorgeMasonUniversityforgenerouslysupportingthisresearch.
GLIFOS-digital_archive