The Power of Independent Thinking


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Volume 4  Number 2  •  Fall 1999
Other Issues:  

Regulatory Moral Hazard: The Real Moral Hazard in Federal Deposit Insurance
By Bert Ely
This article appeared in the Fall 1999 issue of The Independent Review

Many banking experts hold that deposit insurance induces banks to take unwise risks. However, the real problem with deposit insurance is that it shifts the cost of regulatory error to the nation’s surviving banks—a problem preventable with privatized banking regulation and “cross guarantees.”