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U.S. Commercial Banking: Trends, Cycles, and Policy


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  • John H. Boyd
  • Mark Gertler


This paper pinpoints sources of recent problems in U.S. commercial banking. The objective is to provide a context for evaluating policy options. There are three parts. The first documents how increased competition and financial innovation made banking less stable in the 1980s. The second part identifies the specific sources of the industry's difficulties over this decade. We find that the poor ex post performance by large banks provided the main stress on the system. From a variety of evidence, we conclude that this poor performance was the product of increased competition for the industry and a regulatory system that provides greater subsidies to risk-taking by large banks relative to the industry mean. The third part analyzes recent policy reforms and on-going policy options. in the light of our evidence on the main sources of problems in banking.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4404.

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Date of creation: Jul 1993
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Publication status: published as U.S. Commercial Banking: Trends, Cycles, and Policy , John H. Boyd, Mark Gertler. in NBER Macroeconomics Annual 1993, Volume 8 , Blanchard and Fischer. 1993
Handle: RePEc:nbr:nberwo:4404

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  1. Merton, Robert C. & Bodie, Zvi, 1993. "Deposit insurance reform: a functional approach," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 38(1), pages 1-34, June.
  2. Summers, Lawrence H, 1985. " On Economics and Finance," Journal of Finance, American Finance Association, American Finance Association, vol. 40(3), pages 633-35, July.
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