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Unformatted text preview: subsidies for corporate
risk taking is likely against public interest and
encourages a moral hazard.
• FDIC Insurance: In pursuit of maintaining a
positive fund balance and steady assessment
rates throughout economic and credit cycles
and banking crises, the Dodd-Frank Act gave
the FDIC authority to revise how banks are
charged for DIF payments. The new rules that
became effective in February 2011 are more
forward-looking, using risk-based assessments
on what the banks hold in assets minus their
tangible equity (a better measure of the fund’s
risk than bank deposits alone). Additional risk
premium adjustments are made for banks with
higher risk factors, such as assets with unsecured
debt “credit cards” or less stable balance-sheet
liquidity from “transitory” brokered deposits.
Although these new risk-based charges make
intuitive sense, they fail to capture premiums
for other transactions with similar risk characteristics, like “transitory” internet solicitations
for deposits. As DIF assessments evolve, banks 2012 C...
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This note was uploaded on 02/11/2013 for the course MGMT 231 taught by Professor Yu during the Spring '13 term at Bauder.
- Spring '13
- The Lottery