Ailing Banks and S&L's Get Federal Help, But at What Risk?

Gregory Gajewski and Deano Hagerman

Rural America/ Rural Development Perspectives, 1987, vol. 04, issue 01

Abstract: In response to rising rates of bank and S&L failures, lawmakers and regulators have adopted a "wait and see" attitude, allowing many institutions with little or no equity left to remain open. The policy, known as forbearance, is supposed to limit the costs to the deposit insurance funds (FSLIC and FDIC) while preserving financial services in depressed areas, and areas, often rural, where past failures are concentrated. But the incentives for weak and insolvent institution managers to gamble with depositors' money for a return to health may well increase the long-term resolution costs, and not help their local communities.

Keywords: Community/Rural/Urban Development; Financial Economics; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uersra:310466

DOI: 10.22004/ag.econ.310466

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