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The federal deposit insurance fund that didn't put a bite on U.S. taxpayers

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  • Kane, Edward J.
  • Hendershott, Robert

Abstract

Unlike the Federal Savings and Loan Insurance Corporation and the Bank Insurance Fund, the National Credit Union Share Insurance Fund (NCUSIF) entered the 1990s in a state of accounting solvency. This paper develops evidence to show the more important fact that NCUSIF remained solvent in a market-value sense as well. Differences in institutional product lines and risk-taking opportunities between credit unions and banks and thrifts are not consequential enough to explain the differences in their funds' health. This paper explains how differences in decisionmaking environments made managerial and regulatory risk-taking incentives in the credit-union industry diverge substantially from those governing banks and S&Ls. The differences in incentive structure support the hypothesis that private coinsurance could lessen taxpayer loss exposure elsewhere in the federal deposit insurance system.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 20 (1996)
Issue (Month): 8 (September)
Pages: 1305-1327

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Handle: RePEc:eee:jbfina:v:20:y:1996:i:8:p:1305-1327

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Web page: http://www.elsevier.com/locate/jbf

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References

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  1. Smith, Donald J & Cargill, Thomas F & Meyer, Robert A, 1981. "An Economic Theory of a Credit Union," Journal of Finance, American Finance Association, vol. 36(2), pages 519-28, May.
  2. Smith, Donald J, 1984. " A Theoretic Framework for the Analysis of Credit Union Decision Making," Journal of Finance, American Finance Association, vol. 39(4), pages 1155-68, September.
  3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  4. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
  5. Edward J. Kane, 1988. "Changing incentives facing financial-services regulators," Proceedings, Federal Reserve Bank of Cleveland, pages 265-279.
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Cited by:
  1. Cabo, Paula & Rebelo, Joao, 2005. "Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24623, European Association of Agricultural Economists.
  2. Timur Han Gür & Naci Canpolat & Hüseyin Özel, 2011. "The Crisis and After: There Is No Alternative?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 113-133, March.
  3. Leggett, Keith J. & Strand, Robert W., 2002. "Membership growth, multiple membership groups and agency control at credit unions," Review of Financial Economics, Elsevier, vol. 11(1), pages 37-46.
  4. William R. Emmons & Frank A. Schmid, 1999. "Credit unions and the common bond," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 41-64.
  5. Asli Demirguc-Kunt & Edward J. Kane, 2002. "Deposit Insurance Around the Globe: Where Does It Work?," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 175-195, Spring.
  6. Cull, Robert, 1998. "How deposit insurance affects financial depth : a cross-country analysis," Policy Research Working Paper Series 1875, The World Bank.

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