The Analytical Economist; August 1993; Scientific American Magazine; by Judith Fields and Paul Wallich; 1 Page(s)
During the past few years, the commercial banking industry has been riding on the brink of a debacle even larger than the savings and loan disaster of the mid-1980s. Although economic conditions appear to be giving banks some breathing room, proposals for strengthening the underpinnings of the system have evoked disagreements among economists. Indeed, some claim that federal deposit insurance, long considered essential to preventing bank panics, may cost taxpayers more than it is worth, unless the U.S. makes fundamental changes in the structure of its banking institutions.
At the end of 1992 there were 950 "troubled" banks, with $500 billion in assets, according to John P. LaWare of the Federal Reserve Bank Board of Governors. And the reserves of the Federal Deposit Insurance Corporation (FDIC), which stands behind deposits up to $100,000, were nearly depleted from closing or reorganizing shaky commercial banks over the past few years.