Don't mess with success
Article Abstract:
FDIC Chmn Ricki Helfer argues that deposit insurance should not be privatized. She criticizes the recommendations made by the Bank Administration Institute and McKinsey & Co, which call for the autonomy of the FDIC from the government and its transformation into a privately funded and managed insurance company that would still take care of small depositors while ensuring market discipline. Helfer asserts that this suggestion is not tenable, as evidenced by dismal performance of private deposit insurance and other similar entities without links to the federal government. She bolsters her case against the proposal by mentioning that federal deposit insurance has benefited the country in three ways. It has given depositors peace of mind, prevented bank panics and facilitated stability to monetary and fiscal policies.
Publication Name: Banking Strategies
Subject: Business
ISSN: 1091-6385
Year: 1997
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Wake up to market realities
Article Abstract:
The realities of the market provide sound justifications for the privatization of deposit insurance, particularly the Federal Deposit Insurance Corp. A paper submitted by the Bank Administration Institute and McKinsey & Co proposes that the FDIC be divorced from the government, modern insurance underwriting practices be observed, blanket guarantees be eradicated, and the self-interests of uninsured depositors be protected. These recommendations make sense because assets are being transferred from insured institutions, thereby eroding the stabilizing influence of the federal deposit insurance. If private deposit insurance is implemented, market discipline can be achieved not through government regulation but through the depositors.
Publication Name: Banking Strategies
Subject: Business
ISSN: 1091-6385
Year: 1997
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The New Depositor Preference Act: time inconsistency in action
Article Abstract:
Reforms in the national depositor preference legislation is likely to affect the long term investment activity of foreign depositors and creditors in the US banking industry. The stipulation prioritizing the uninsured depositors in claims for failed banks and thrifts reduces the incentives of investors to place their investments in banks and thrifts, since the depositor preference legislation is an added risk in their investments, affecting both short-term and long-term investment decisions.
Publication Name: Managerial Finance
Subject: Business
ISSN: 0307-4358
Year: 1997
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