Deposit Insurance Is Not Free

Mercatus on Policy, No. 115, 2012

4 Pages Posted: 18 Dec 2012  

William J. Luther

Kenyon College

Thomas L. Hogan

Troy University

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

Kenyon College ( email )

Gambier, OH 43022
United States

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

Thomas L. Hogan (Contact Author)

Troy University ( email )

Troy, AL
United States

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