The banking industry of the 1950s, 1960s, and 1970s is often described as operating according to a 3-6-3 rule: Bankers gathered deposits at 3 percent, lent them at 6 percent, and were on the golf course by 3 o'clock in the afternoon. The implication was that the banking industry was less...

Market forces and regulatory changes have produced an evolution of the credit union industry so that many credit unions now compete more directly with banks than in the past. Because credit unions are tax-exempt, while in general banks are not, observers note that credit unions may have an...

Contagion-induced bank runs are widely viewed as the cause of widespread bank failures during the Great Depression. Federal deposit insurance was created in 1934 to prevent future contagion-generated bank failures. Yet the cycle of bank failures appears quite similar to an industrial shakeout, a...

To minimize their losses, creditors of insolvent nonbank firms have every incentive to force prompt closure, thereby ensuring that assets of such firms are redirected to more valuable uses. For banks and savings institutions, however, deposit insurance blunts the incentive by removing...

Banking/commerce combinations, whereby a banking firm conducts commercial activities such as manufacturing, have long been prohibited in the United States. The traditional concerns with such combinations -- conflicts of interest and the spread of monopoly power -- are not compelling in today's...

In 1977, Congress passed the Community Reinvestment Act (CRA) to encourage expanded lending and investment in lower income communities. In accordance with the Act, federal bank regulators periodically evaluate banks' lending performance in such communities, providing both carrot and stick to...

Public merger announcements often state which type of merger accounting, pooling or purchase, has been employed. The choice can strongly influence accounting results. For example, reported earnings are often higher under pooling than purchase accounting. Yet empirical analysis indicates that the...

The author describes the fair lending laws and how they are enforced. He then compares such enforcement with the corresponding enforcement of antidiscrimination laws in employment and housing. The comparison reveals that the current practice of routine examination of every bank for signs of...

Banks may receive a subsidy from deposit insurance or from other components of the government-provided banking safety net. Extension (leakage) of a subsidy to banks' nonbank affiliates will only serve to enlarge it. But subsidy enlargement, since it entails expanded risks to taxpayers and...

Recent years have seen bank loan losses exceeded only by those of the Great Depression. This experience, along with tax and regulatory changes, has triggered changes in the reserve account through which banks provide for such losses