Dimensions: 0.25'' x 8.25'' x 5.50'' 45 pages AEI Press  (Washington) Publication Date: December 1997 Paperback ISBN: 0844771007 Price: $ 9.95 Add to Cart   Examination Copies

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The financial safety net constructed in the 1930s--in which government absorbs the risk of private bank defaults--may be the single most destabilizing influence in the financial system. According to the author of this volume, government policies to stabilize the banking system by insuring deposits create perverse incentives by protecting weak institutions from the discipline of the market. The author argues that the efforts of Chile, Argentina, and other countries to reform their banking systems provide useful lessons to the United States and other countries about ways to introduce private market discipline into government deposit insurance.

The Postmodern Bank Safety Net is one in a series of new AEI studies on subjects relating to the deregulation of financial markets. The series will focus on the regulation of the new multiproduct financial services firm; the costs and benefits of the government safety net; pricing and access for banks and nonbanks; globalization and the level playing field; mutual fund regulation; electronic commerce; securities markets; and corporate governance.

Charles W. Calomiris is the Paul M. Montrone Professor of Finance and Economics at Columbia University and a visiting scholar at AEI.