1990 Articles

Cooperative Arrangements for the Regulation of Banking by Banks

Calomiris, Charles W.; Kahn, Charles M.

Government is today the primary regulator of the US banking system. The Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and corresponding state organizations formulate the rules by which banks compete for loans and funds. In the wake of the savings and loan crisis, many observers have begun to question whether government can police the system properly. In this article we suggest an alternative system for banking regulation: voluntary, cooperative arrangements among banks for self-policing and self-insurance.