This preview shows page 1. Sign up to view the full content.
Unformatted text preview: 4. Explain why deposit insurance exacerbates the moral hazard problem in banking. 5. What type of bank regulations are designed to reduce moral hazard problems created by deposit insurance? Will they completely eliminate the moral hazard problem? 6. Explain how the contagion eﬀect (where one bank failure hastens the failure of another bank) happens. What is the role of FDIC insurance in preventing bank runs? 1...
View Full Document
This note was uploaded on 07/02/2009 for the course ECON 0280 taught by Professor Jamesmaloy during the Summer '09 term at Pittsburgh.
- Summer '09