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The Federal Deposit Insurance Fund That Didn't Put A Bite on U.S. Tax Payers

  • Edward J. Kane
  • Robert Hendershott

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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4648.

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Date of creation: Feb 1994
Date of revision:
Publication status: published as Journal of Banking and Finance, 20(September,1996), pp.1305-1327
Handle: RePEc:nbr:nberwo:4648
Note: CF
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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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. 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.
  3. 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.
  4. Edward J. Kane, 1988. "Changing incentives facing financial-services regulators," Proceedings, Federal Reserve Bank of Cleveland, pages 265-279.
  5. 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.
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