NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Legacy of Deposit Insurance: The Growth, Spread, and Cost of Insuring Financial Intermediaries

Eugene N. White

NBER Working Paper No. 6063
Issued in June 1997
NBER Program(s):   DAE   ME

Without the Great Depression, the United States would not have adopted deposit insurance. While the New Deal's anti-competitive barriers have largely collapsed become" deeply rooted. This paper examines how market and political competition for deposits raised the level of coverage and spread insurance to all depository institutions. A comparison of the cost of federal insurance with a counterfactual of an insurance-free system shows that federal insurance ultimately imposed a" higher cost but achieved political acceptance because of the distribution of the burden.

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