Deposit Insurance Is Not Free
Mercatus on Policy, No. 115, 2012
4 Pages Posted: 18 Dec 2012
Date Written: December 1, 2012
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. Moreover, we offer explanations for the increasing cost of government-provided deposit insurance observed over time. We propose that economists and policy makers must consider the real costs when evaluating government-provided deposit insurance.
Suggested Citation: Suggested Citation