Deposit Insurance Is Not Free

Mercatus on Policy, No. 115, 2012

4 Pages Posted: 18 Dec 2012

See all articles by William J. Luther

William J. Luther

Florida Atlantic University; American Institute for Economic Research

Thomas L. Hogan

Rice University - Baker Institute for Public Policy

Date Written: December 1, 2012

Abstract

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

Luther, William J. and Hogan, Thomas L., Deposit Insurance Is Not Free (December 1, 2012). Mercatus on Policy, No. 115, 2012. Available at SSRN: https://ssrn.com/abstract=2190523

William J. Luther

Florida Atlantic University ( email )

777 Glades Road
Boca Raton, FL 33431
United States

HOME PAGE: http://www.wluther.com

American Institute for Economic Research ( email )

PO Box 1000
Great Barrington, MA 01230
United States

HOME PAGE: http://www.aier.org/staff/william-j-luther

Thomas L. Hogan (Contact Author)

Rice University - Baker Institute for Public Policy ( email )

6100 Main Street, MS-40
Houston, TX 77005
United States

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