A Comment Concerning Deposit Insurance and Moral Hazard
AbstractHooks and Robinson argue that moral hazard induced by deposit insurance induced banks to invest in riskier assets in Texas during the 1920s. Their regressions suggest this manifestation of moral hazard may explain a portion of the events that occurred during the 1920s, but some other phenomena, hitherto overlooked, must also be at work. Economic logic and evidence form the archives of the Board of Governors suggest that phenomenon is mismanagement and defalcation by corporate officers, which increases when insurance reduces depositors' incentives to monitor and react to the safety and soundness of banks.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12719.
Date of creation: Dec 2006
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Note: DAE CF ME
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- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
- N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
- N2 - Economic History - - Financial Markets and Institutions
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