Deposit Insurance Altered the Composition of Bank Suspensions during the 1920s: Evidence from the Archives of the Board of Governors

Chung Ching-Yi () and Gary Richardson
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Chung Ching-Yi: Central Bank of China

The B.E. Journal of Economic Analysis & Policy, 2006, vol. 5, issue 1, 44

Abstract: Eight states established deposit insurance systems between 1908 and 1917. All abandoned the systems between 1921 and 1930. Scholars debate the costs and benefits of these policy experiments. New data drawn from the archives of the Federal Reserve Board of Governors demonstrate that deposit insurance influenced the composition of bank suspensions in these states. In typical years, suspensions due to runs fell. Suspensions due to mismanagement rose. During the penultimate year of each system, the bank failure rate rose to an unsustainable height and the system ceased operations.

Keywords: deposit insurance; moral hazard; free riding; united states; national banking system; banking panics; Board of Governors; composition of bank failures (search for similar items in EconPapers)
Date: 2006
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DOI: 10.2202/1538-0645.1588

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