When deposit insurance's perceived reliability falls, market discipline returns: in Mexico's 1990s crisis, nominal 100% coverage remained but depositors, doubting the government could cover the losses, withdrew from weak banks—demonstrating that depositors discipline banks whenever they actually bear risk.

causalpending

Speaker

Charles Calomiris

Evidence Quote

there were so many losses that people started saying I'm not sure the government can cover these losses

Source

Charles Calomiris on the Financial Crisis 10/26/2009EconTalk
Created: 6/15/2026, 9:20:15 AM

My Notes

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