Capital forbearance and thrifts: an ex post examination of regulatory gambling
This paper estimates the losses embedded in the capital positions of the 996 FSLIC-insured savings and loan institutions that did not meet capital standards at the end of the 1970s. We compare the estimated cost of resolving the insolvencies of these institutions at the end of the 1970s with the actual failure-resolution costs for those that were closed by July 3 1, 1992, and the projected resolution costs for the remaining thrifts that are likely to be closed. Our results show that even when one considers only the direct costs associated with delayed closure of economically failed thrifts, these costs significantly exceed reasonable estimates of the cost of prompt failure resolution.
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|Date of creation:||1993|
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|Publication status:||Published in Conference on Bank Structure and Competition (1993 : 29th)|
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- Kane, Edward J., 1986. "Appearance and reality in deposit insurance: The case for reform," Journal of Banking & Finance, Elsevier, vol. 10(2), pages 175-188, June.
- Asli Demirgüç-Kunt, 1991. "Principal-agent problems in commercial-bank failure decisions," Working Paper 9106, Federal Reserve Bank of Cleveland.
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"Modeling Structural and Temporal Variation in the Market's Valuation of Banking Firms,"
NBER Working Papers
2693, National Bureau of Economic Research, Inc.
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- Christopher J. Pike & James B. Thomson, 1991. "The RTC and the escalating costs of the thrift insurance mess," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
- John B. Shoven & Scott B. Smart & Joel Waldfogel, 1991.
"Real Interest Rates and the Savings and Loan Crisis: The Moral Hazard Premium,"
NBER Working Papers
3754, National Bureau of Economic Research, Inc.
- John B. Shoven & Scott B. Smart & Joel Waldfogel, 1992. "Real Interest Rates and the Savings and Loan Crisis: The Moral Hazard Premium," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 155-167, Winter.
- James B. Thomson, 1987. "FSLIC forbearances to stockholders and the value of savings and loan shares," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 26-35.
- Patric Hendershott & Edward J. Kane, 1992. "Office Market Values During the Past Decade: How Distorted Have Appraisals Been?," NBER Working Papers 4128, National Bureau of Economic Research, Inc.
- Kane, Edward J, 1990. " Principal-Agent Problems in S&L Salvage," Journal of Finance, American Finance Association, vol. 45(3), pages 755-64, July.
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