TY  - JOUR
AU  - Kane,Edward J.
AU  - Wilson,Berry K.
TI  - A Contracting-Theory Interpretation of the Origins of Federal Deposit Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6451
PY  - 1998
Y2  - March 1998
UR  - http://www.nber.org/papers/w6451
L1  - http://www.nber.org/papers/w6451.pdf
N1  - Author contact info:
Edward J. Kane
2325 E Calle Los Altos
Tucson, AZ 85718
Tel: 617/552-3986
Fax: 617/552-0431
E-Mail: edward.kane@bc.edu
M1  - published as Journal of Money, Credit and Banking, Vol. 30 (August 2000):  51-74.
AB  - Conventional wisdom holds that the enactment of federal deposit insurance helped small rural banks at the expense of large urban institutions.  This paper uses asymmetric information, agency-cost paradigms from corporate finance theory and data on bank stock prices to show how deposit insurance could and did help stockholders of large banks.  The broadening stockholder distribution of large banks during the stock market bubble of the late 1920s undermined the efficiency of double liability provisions in controlling incentive conflict among large bank stakeholders.  Federal deposit insurance restored depositor confidence by asking government officials to take over and bond the task of monitoring managerial performance and solvency at U.S. banks.
ER  -