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U.S. DEPOSIT INSURANCE REFORM
Author(s) -
CARGILL THOMAS F.,
MAYER THOMAS
Publication year - 1992
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1992.tb00239.x
Subject(s) - treasury , deposit insurance , regulatory reform , restructuring , finance , too big to fail , financial system , bank failure , business , economics , capital (architecture) , financial crisis , political science , market economy , macroeconomics , law , history , archaeology
Congress, late in 1991, enacted a banking reform measure that (i) authorizes $70 billion of additional FDIC funding, (ii) enhances bank regulation and supervision, and (Hi) adopts a “trip wire” system for increasingly severe regulation based on a bank's capital. Congress rejected a number of key elements of the Treasury proposal submitted early in 1991, such as interstate banking and expanded bank powers. The Congressional action does not end the debate over banking reform. In due time, other attempts likely will be made to restructure the banking system along the lines of the Treasury proposal. The Treasury proposal's positive points failed to offset its fundamental problems. The Congressional action, though not subject to the Treasury proposal's problems, falls short of complete deposit insurance reform. Both proposals fail to recognize that regulatory oversight is a poor substitute for market discipline in the current financial environment. This paper reviews problems with the financial reform process and failure of the Treasury proposal to recognize these problems. It also reviews alternative approaches to deposit insurance reform.