Instability is not an inherent feature of the banking system, but is a consequence of mispriced deposit insurance and other government policies. To foster a truly safe and sound banking system, policymakers must better understand the business of banking and the real causes and effects, as opposed to the popular mythology, of bank failures.

George G. Kaufman is the John F. Smith Professor of Finance and Economics at Loyola University Chicago.
Banking and FinanceBanking Law and RegulationEconomyLaw and Liberty
Other Independent Review articles by George G. Kaufman
Winter 2002/03 What Is Systemic Risk, and Do Bank Regulators Retard or Contribute to It?