Banks are not Special: The Federal Safety Net and Banking Powers
Public moneys should not be used to subsidize the risk-taking activities of depository institutions.
The lender of last resort should confine its activities to lending to support the short-term liquidity needs of depository institutions and should not engage in equity investment or capital replacement for banks or thrift institutions.
The deposit insurance laws should be strictly construed to reduce moral hazard and to avoid favoring one class of institutions or claimants over other classes.
The central bank should neither monetize the Treasury’s deficits nor make payments that either would not be made or would be made by the Treasury if the central bank did not make them.
KeywordsCentral Bank Federal Reserve Deposit Insurance Bank Failure Financial Service Industry
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