Stealing Deposits: Deposit Insurance, Risk-Taking and the Removal of Market Discipline in Early 20th Century Banks

In a recent paper C.Calomiris (Columbia) and M. Jaremski (Colgate) argue that deposit insurance can reduce liquidity risk, but also can increase insolvency risk by encouraging reckless behavior.

By investigating state deposit insurance experiments in the United States of the early 20th century, they find the introduction of deposit insurance may have actually increased systemic risk, instead of mitigating it (see

The paper also argues that economic models that attempt to explain the attraction of deposit insurance may be less relevant than political ones.


Author: Karel-Jan Vandormael

Head of study program paralegal studies University College PXL Hasselt, Voluntary researcher KU Leuven and teaching assistant UHasselt, attorney

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: