Alternatives to FDIC Deposit Insurance

The Independent Review, Forthcoming

36 Pages Posted: 25 Feb 2015 Last revised: 26 Aug 2015

See all articles by Thomas L. Hogan

Thomas L. Hogan

Rice University - Baker Institute for Public Policy

Kristine Johnson

George Mason University - Department of Economics

Date Written: August 20, 2015

Abstract

This paper considers potential alternatives to the Federal Deposit Insurance Corporation (FDIC) system of deposit insurance in the United States. We review the international and historical literature on deposit insurance which finds higher government involvement in the deposit insurance system increases the likelihood of bank failures and financial crises. We discuss three potential changes to the FDIC system. First, deposit insurance could be government mandated but privately administered as is done in most developed countries. Second, coverage levels could be lowered and supplemented by currently available private issuers. Third, the mandate on deposit insurance could be lifted and the supply of insurance privatized. Empirical evidence indicates these changes would reduce bank failures and financial crises.

Keywords: Deposit insurance, FDIC, Bank failures, Financial crises

JEL Classification: E44, G28, G21

Suggested Citation

Hogan, Thomas L. and Johnson, Kristine, Alternatives to FDIC Deposit Insurance (August 20, 2015). The Independent Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2568767 or http://dx.doi.org/10.2139/ssrn.2568767

Thomas L. Hogan (Contact Author)

Rice University - Baker Institute for Public Policy ( email )

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

Kristine Johnson

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

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