TY  - JOUR
AU  - Richardson,Gary
TI  - A Comment Concerning Deposit Insurance and Moral Hazard
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12719
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12719
L1  - http://www.nber.org/papers/w12719.pdf
N1  - Author contact info:
Gary Richardson
Department of Economics
University of California, Irvine
3155 Social Sciences Plaza
Irvine, CA 92697-5100
Tel: 949/824-3189
Fax: 949/824-2182
E-Mail: garyr@uci.edu
AB  - Hooks and Robinson argue that moral hazard induced by deposit insurance induced banks to invest in riskier assets in Texas during the 1920s. Their regressions suggest this manifestation of moral hazard may explain a portion of the events that occurred during the 1920s, but some other phenomena, hitherto overlooked, must also be at work. Economic logic and evidence form the archives of the Board of Governors suggest that phenomenon is mismanagement and defalcation by corporate officers, which increases when insurance reduces depositors' incentives to monitor and react to the safety and soundness of banks.
ER  -