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FDICIA after Five Years

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Author Info
Benston, George J
Kaufman, George G
Abstract

At year-end 1991, Congress enacted fundamental deposit insurance reform for banks and thrifts--the FDIC Improvement Act. This reform followed the failure of more than 2,000 depository institutions in the 1980s. Many failed because the incentive incompatibility of the structure of federal government-provided deposit insurance encouraged moral hazard behavior by banks and poor agent behavior by regulators. Insurance was put on a more incentive compatible basis, providing for a graduated series of sanctions mimicking market discipline that first may and then must be applied by the regulators on floundering banks. This article reviews these changes and evaluates early results. Copyright 1997 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 11 (1997)
Issue (Month): 3 (Summer)
Pages: 139-58
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Handle: RePEc:aea:jecper:v:11:y:1997:i:3:p:139-58

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lawrence J. White, 1989. "The reform of Federal Deposit Insurance," Proceedings, Federal Reserve Bank of Chicago, pages 575-604.
  2. Joe Peek & Eric S. Rosengren, 1996. "Will legislated early intervention prevent the next banking crisis?," Working Papers 96-5, Federal Reserve Bank of Boston. [Downloadable!]
    Other versions:
  3. Jaffee, Dwight M, 1989. "Symposium on Federal Deposit Insurance for S&L Institutions," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 3-9, Fall. [Downloadable!] (restricted)
  4. Miller, Geoffrey P., 1996. "Is deposit insurance inevitable? Lessons from Argentina," International Review of Law and Economics, Elsevier, vol. 16(2), pages 211-232, June. [Downloadable!] (restricted)
  5. Jones, David S. & King, Kathleen Kuester, 1995. "The implementation of prompt corrective action: An assessment," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 491-510, June. [Downloadable!] (restricted)
  6. White, Lawrence J, 1989. "The Reform of Federal Deposit Insurance," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 11-29, Fall. [Downloadable!] (restricted)
  7. Kane, Edward J, 1989. "The High Cost of Incompletely Funding the FSLIC Shortage of Explicit Capital," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 31-47, Fall. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Santonu Basu, 2003. "Why do Banks Fail?," International Review of Applied Economics, Taylor and Francis Journals, vol. 17(3), pages 231-248, July. [Downloadable!] (restricted)
  2. John S. Jordan, 2000. "Depositor discipline at failing banks," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 15-28. [Downloadable!]
  3. Huberto M. Ennis & H.S. Malek, 2005. "Bank risk of failure and the too-big-to-fail policy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 21-44. [Downloadable!]
  4. W. Scott Frame & Larry Wall, 2002. "Fannie Mae's and Freddie Mac's voluntary initiatives: Lessons from banking," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 45-59. [Downloadable!]
  5. George Benston, 2000. "Consumer Protection as Justification for Regulating Financial-Services Firms and Products," Journal of Financial Services Research, Springer, vol. 17(3), pages 277-301, September. [Downloadable!] (restricted)
  6. Ying Yan, 1998. "The FDICIA and bank CEOs' pay-performance relationship: an empirical investigation," Working Paper 9805, Federal Reserve Bank of Cleveland. [Downloadable!]
  7. Panos Konstas, 2006. "Reforming Deposit Insurance: The Case to Replace FDIC Protection with Self-Insurance," Economics Public Policy Brief Archive ppb_83, Levy Economics Institute, The. [Downloadable!]
  8. Abel Elizalde, 2007. "From Basel I To Basel Ii: An Analysis Of The Three Pillars," Working Papers wp2007_0704, CEMFI. [Downloadable!]
  9. R. Alton Gilbert & Mark D. Vaughan, 2000. "Do depositors care about enforcement actions?," Working Papers 2000-020, Federal Reserve Bank of St. Louis. [Downloadable!]
  10. Antoine Martin, 2003. "A guide to deposit insurance reform," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 29-54. [Downloadable!]
  11. David G. Mayes, 2004. "An approach to bank insolvency in transition and emerging economies," Finance 0404015, EconWPA. [Downloadable!]
    Other versions:
  12. Cargill, Thomas, 2004. "Japan’s Economic and Financial Stagnation and the Possibility of a Second Lost Decade," EIJS Working Paper Series 199, The European Institute of Japanese Studies. [Downloadable!]
  13. George G. Kaufman, 1998. "Central banks, asset bubbles, and financial stability," Working Paper Series WP-98-12, Federal Reserve Bank of Chicago. [Downloadable!]
  14. Xavier Freixas & Bruno Maria Parigi, 2007. "Banking Regulation and Prompt Corrective Action," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  15. George G. Kaufman, 2003. "Depositor liquidity and loss-sharing in bank failure resolutions," Working Paper Series WP-03-02, Federal Reserve Bank of Chicago. [Downloadable!]
  16. Gerard Caprio & Patrick Honohan, 1999. "Restoring Banking Stability: Beyond Supervised Capital Requirements," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 43-64, Fall. [Downloadable!] (restricted)
    Other versions:
  17. Panos Konstas, 2005. "FDIC-Sponsored Self-Insured Depositors: Using Insurance to Gain Market Discipline and Lower the Cost of Bank Funding," Economics Working Paper Archive wp419, Levy Economics Institute, The. [Downloadable!]
  18. Masami Imai, 2006. "The Emergence of Market Monitoring in Japanese Banks: Evidence from the Subordinated Debt Market," Wesleyan Economics Working Papers 2006-008, Wesleyan University, Department of Economics. [Downloadable!]
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