The Causes and Costs of Depository Institution Failures

One of the major financial market events of the 1980s was the precipitous rise of depository institution failures including banks, savings and loan associations, and credit unions. Not since the 1930s has there been a similar period of turmoil in these industries. The events of the 1980s have inspired a renewed interest in the causes and cost of financial institution failure and several questions that had seldom been asked in the post-World War II economics literature have resurfaced

• Why do financial institutions fail?
• What are the costs of their failure?
• How do they differ from other firms and industries?
• What are the implications for financial market regulation? The Causes and Costs of Depository Institution Failures critically surveys and extends previous analyses of these questions. Audience: Scholars and researchers in the areas of money and banking, financial institutions, and financial markets, as well as regulators and policymakers.

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Contributing Authors. 1. Introduction; A.F. Cottrell, et al. 2. S&L Closures and Survivors: Are There Systematic Differences in Behavior? J.R. Barth, et al. 3. Deregulation Gone Awry: Moral Hazard in the Savings and Loan Industry; R.A. Cole, et al. 4. Underlying Determinants of Closed-Bank Resolution Costs; W.P. Osterberg, J.B. Thomson. 5. Federal Reserve Lending to Banks that Failed: Implications for the Bank Insurance Fund; R.A. Gilbert. 6. The Savings and Loan Debacle: Moral Hazard or Market Disaster? G.A. Lilly. 7. What Are the Connections Between Deposit Insurance and Bank Failures? A.F. Cottrell, et al. 8. Bank Failures as Poisson Variates: A Reappraisal; N. Davutyan. 9. A Triggering Mechanism of Economywide Bank Runs; Sangkyun Park. 10. Herd Behavior or Animal Spirits: A Possible Explanation of Credit Crunches and Bubbles; T.S. Mondschean, R.A. Pecchenino. Index.