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

Abstract

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.

JEL Classification: G28, N21, N22