Lessons from the History of Bank Examination and Supervision in the United States, 1863-2008

The history of American banking provides five distinct regulatory/supervisory regimes that cast light on the difficulties of constructing a regime that will guarantee the efficiency as well as the safety and soundness of the system. A basic taxonomy of regulation and supervision is provided to identify the key elements and rationale of each regime. Mark-to-market and prompt closure of insolvent institutions produced the lowest cost to depositors, shareholders and taxpayers, whereas discretion and forbearance created the banking cataclysms of the 1980s and 2000s