Abstract
The purpose of this paper is to stimulate reconsideration of fundamental principles in the debate on the restructuring of the financial services industry. Four underlying propositions are defended:
-
1.
Public moneys should not be used to subsidize the risk-taking activities of depository institutions.
-
2.
The lender of last resort should confine its activities to lending to support the short-term liquidity needs of depository institutions and should not engage in equity investment or capital replacement for banks or thrift institutions.
-
3.
The deposit insurance laws should be strictly construed to reduce moral hazard and to avoid favoring one class of institutions or claimants over other classes.
-
4.
The central bank should neither monetize the Treasury’s deficits nor make payments that either would not be made or would be made by the Treasury if the central bank did not make them.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Board of Governors of the Federal Reserve System. 1990. “Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of F.R. Banks.” Publication H-1. Washington, D.C.: Board of Governors, April 19.
Caliguire, Daria B., and Thomson, James B. 1987. “FDIC Policies for Dealing with Failed and Troubled Institutions.” Federal Reserve Bank of Cleveland Economic Commentary, October 1.
Dewey, Davis R. 1903. Financial History of the United States. New York: Longmans Green Co.
Duke, Paul, Jr. 1990. “Basis of Fed’s Oversight of Bank Firms May Be Questioned in Wake of Ruling.” Wall Street Journal, May 17, p. A3.
Ely, Bert. 1989. “Technology, Regulation and the Financial Services Industry in the Year 2000.” In Federal Reserve Bank of Chicago, The Financial Services Industry in the Year 2000: Risk and Efficiency, proceedings of a conference on Bank Structure and Competition, May 11–13, 1988, pp. 578–601.
Federal Deposit Insurance Corporation. 1987. Annual Report 1986. Washington, D.C.: FDIC.
Federal Deposit Insurance Corporation. 1988. Annual Report 1987. Washington, D.C.: FDIC.
Federal Deposit Insurance Corporation. 1989. Annual Report 1988. Washington, D.C.: FDIC.
Federal Reserve Bank of New York. 1987. Annual Report 1986.
Friedman, Milton. 1960. A Program for Monetary Stability. New York: Fordham University Press.
Hammond, Bray. 1957. Banks and Politics in America. From the Revolution to the Civil War. Princeton, N.J.: Princeton University Press.
Hamilton, Alexander. (1904) 1972a. “Opinion as to the Constitutionality of the Bank of the United States” (1791). In The Works of Alexander Hamilton, edited by Henry Cabot Lodge, vol. 3, pp. 445–93. Reprint. Brooklyn, N.Y.: Haskell House.
Hamilton, Alexander. (1904) 1972b. “Report on Manufactures” (1791). In The Works of Alexander Hamilton, edited by Henry Cabot Lodge, vol. 4, pp. 70–198. Reprint. Brooklyn, N.Y.: Haskell House.
Hamilton, Alexander. (1904) 1972c. “Report on National Bank” (1790). In The Works of Alexander Hamilton, edited by Henry Cabot Lodge, vol. 3, pp. 388–443. Reprint. Brooklyn, N.Y.: Haskell House.
Hayek, Friedrich A. 1944. The Road to Serfdom. Chicago, Ill.: University of Chicago Press.
Heinemann, H. Erich. 1988. “Pious Phrases Aside, Cause of SL Crisis Was Fraud, Greed, and Mismanagement.” American Banker, September 26, pp. 4–5.
Holland, Kelley. 1990. “Bank of New England Said to Be on Mend.” American Banker, May 18.
Jefferson, Thomas. 1975. “Opinion on the Constitutionality of the National Bank.” (1791). In The Portable Thomas Jefferson, edited by Merrill D. Peterson, pp. 261–62. New York: Viking Portable Library, no. 80, Pengu in Books.
Jones, Jesse H., with Edward Angly. 1951. Fifty Billion Dollars: My Thirteen Years with the RFC, 1932–1945. New York: Macmillan.
Kane, Edward J. 1985. The Gathering Crisis in Federal Deposit Insurance. Cambridge, Mass.: MIT Press.
Lever, Harold, and Huhne, Christopher. 1986. Debt and Danger. Boston: Atlantic Monthly Press.
Litan, Robert E. 1987. What Should Banks Do? Washington, D.C.: Brookings Institution.
McTague, Jim, and Rehm, Barbara. 1988. “Wall Now Says FSLIC Needs $45 Billion.” American Banker, October 6, p. 3.
Penning, Ann Cooper. 1968. “Aid to Distressed Banks-Yesterday and Today.” Graduate School of Banking dissertation. Rutgers University.
Rehm, Barbara. 1988. “FDIC Proposes Extended Coverage.” American Banker, October 12, p. 3.
Schumpeter, Joseph A. 1950. Capitalism, Socialism and Democracy. 3d ed. New York: Harper Row.
Spero, Joan Edelman. (1942) 1980. The Failure of the Franklin National Bank. New York: Columbia University Press.
Sprague, Irvine. 1986. Bailout. New York: Basic Books.
Todd, Walker F. 1988. “Lessons of the Past and Prospects for the Future in Lender of Last Resort Theory.” Federal Reserve Bank of Cleveland Working Paper no. 8805, August.
Upham, Cyril B., and Lamke, Edwin. 1934. Closed and Distressed Banks: A Study in Public Administration. Washington, D.C.: Brookings Institution.
Wolf, Frederick D. 1988. “The Federal Savings and Loan Insurance Corporation—Current Financial Condition and Outlook.” Statement before the Senate Committee on Banking, Housing, and Urban Affairs, May 19.
Editor information
Rights and permissions
Copyright information
© 1991 Kluwer Academic Publishers
About this chapter
Cite this chapter
Todd, W.F. (1991). Banks are not Special: The Federal Safety Net and Banking Powers. In: England, C. (eds) Governing Banking’s Future: Markets vs. Regulation. Innovations in Financial Markets and Institutions. Springer, Boston, MA. https://doi.org/10.1007/978-1-4684-6714-7_7
Download citation
DOI: https://doi.org/10.1007/978-1-4684-6714-7_7
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4684-6716-1
Online ISBN: 978-1-4684-6714-7
eBook Packages: Springer Book Archive