The Postmodern Bank Safety Net: Lessons from Developed and Developing Economies

Federal deposit insurance may be "the single most destabilizing influence in the financial system," says economist Charles W. Calomiris in a new study published by AEI. Market discipline provides a better bank safety net than government insurance, he concludes.

The Postmodern Bank Safety Net: Lessons from Developed and Developing Economies shows how government deposit insurance subsidizes the risks taken by banks. Weak banks deliberately and sometimes with impunity take on greater risks than...