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FDIC losses in bank failures: has FDICIA made a difference?

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  • George G. Kaufman

Abstract

This article finds that, although the number of failed banks declined sharply after the passage of the FDIC Improvement Act (FDICIA) in 1991, losses to the FDIC as a percent of assets of failed banks actually increased. Only if adjustments are made both for large losses at a few larger outlier banks and for differences in the size distribution of failures is the FDIC's loss rate in the post-FDICIA period (1993-2002) reduced to below its pre-FDICIA (1980-92) rate.

Suggested Citation

  • George G. Kaufman, 2004. "FDIC losses in bank failures: has FDICIA made a difference?," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 28(Q III), pages 13-25.
    • Handle: RePEc:fip:fedhep:y:2004:i:qiii:p:13-25:n:v.28no.3
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    1. Robert A. Eisenbeis & Larry D. Wall, 2002. "The major supervisory initiatives post-FDICIA: Are they based on the goals of PCA? Should they be?," FRB Atlanta Working Paper 2002-31, Federal Reserve Bank of Atlanta.
    2. Barth, James R & Bartholomew, Philip F & Bradley, Michael, 1990. "Determinants of Thrift Institution Resolution Costs," Journal of Finance, American Finance Association, vol. 45(3), pages 731-754, July.
    3. George J. Benston & George G. Kaufman, 1998. "Deposit insurance reform in the FDIC Improvement Act: the experience to date," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 22(Q II), pages 2-20.
    4. John R. Walter, 2004. "Closing troubled banks : how the process works," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 90(Win), pages 51-68.
    5. Ely, David P. & Varaiya, Nikhil P., 1996. "Opportunity costs incurred by the RTC in cleaning up S&L insolvencies," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(3), pages 291-310.
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    1. Wall, Larry D. & Eisenbeis, Robert A. & Frame, W. Scott, 2005. "Resolving large financial intermediaries: Banks versus housing enterprises," Journal of Financial Stability, Elsevier, vol. 1(3), pages 386-425, April.
    2. García-Céspedes, Rubén & Moreno, Manuel, 2014. "Estimating the distribution of total default losses on the Spanish financial system," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 242-261.
    3. Robert R. Bliss & George G. Kaufman, 2006. "U.S. corporate and bank insolvency regimes: an economic comparison and evaluation," Working Paper Series WP-06-01, Federal Reserve Bank of Chicago.
    4. Gillian G.H. Garcia & Rosa M. Lastra & María J. Nieto, 2009. "Bankruptcy and reorganization procedures for cross‐border banks in the EU," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 17(3), pages 240-276, July.
    5. ap Gwilym, Rhys & Kanas, Angelos & Molyneux, Philip, 2013. "U.S. prompt corrective action and bank risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 239-257.
    6. Sorana Vătavu & Marilen Pirtea & Sorin Vătavu, 2011. "A Review of Financial Regulations to Avoid the Nationalisation of Losses in the Banking System," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 11(1), pages 277-288.

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