Working Paper: NBER ID: w11814
Authors: Frederic S. Mishkin
Abstract: This review essay examines whether too-big-to-fail is as serious a problem as Gary Stern and Ron Feldman contend. This essay argues that Stern and Feldman overstate the importance of the too-big-to-fail problem and do not give enough credit to the FDICIA legislation of 1991 for improving bank regulation and supervision. However, this criticism of the Stern and Feldman book does not detract from many of its messages. Even if the too-big-to-fail problem is not as serious as they contend, the policies they outline can make it less likely that a banking crisis will occur even if driven by other factors.
Keywords: No keywords provided
JEL Codes: G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| TBTF policy (G28) | increased risk-taking by banks (G21) |
| increased risk-taking by banks (G21) | moral hazard (G52) |
| moral hazard (G52) | likelihood of bank failures (G21) |
| FDICIA legislation (G28) | improved bank regulation (G28) |
| FDIC guarantee (G28) | TBTF problem illustrated (F65) |