This paper considers potential alternatives to the Federal Deposit Insurance Corporation (FDIC) system of deposit insurance in the United States. We review the international and historical literature on deposit insurance which finds higher government involvement in the deposit insurance system...

Most people believe the benefits of deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC) clearly exceed the costs. However, a growing literature suggests the benefits of FDIC insurance are overstated while the costs are understated. We add to this literature by...

Most depositors love the security offered by the Federal Deposit Insurance Corporation (FDIC), but few realize the true costs of deposit insurance. Since government deposit insurance is not priced at “actuarially fair” rates, it raises the costs of insurance for depositors and encourages...

The Diamond–Dybvig model is often cited as a theoretical justification for government-provided deposit insurance. Guaranteeing bank deposits removes the temptation for individual depositors to run on the bank and thereby precludes the need to ever use the deposit insurance. Hence, deposit...

In this policy brief, we explain the fundamentals of risk-based capital (RBC) regulation and discuss some potential shortcomings of this system. We propose that the Fed end its use of RBC regulation and return to the use of simple capital ratios as measures of bank risk

In this policy brief we review the theoretical argument for government-provided deposit insurance and compare it to the actual costs observed under the Federal Deposit Insurance Corporation (FDIC) in the United States. Contrary to theoretical arguments, deposit insurance is not free in practice....