a central bank like the federal reserve in the united states can help banks survive a bank run by

Some countries, hoping to prevent wholesale deposit withdrawals that could cause healthy banks to fail and to bring stability to a troubled banking system, have tried to create a deposit insurance system in just this way. On the surface, it appears that a national deposit insurance system can be set up quickly and easily, by announcing a public guarantee of bank deposits.

The hare could not catch up, and the tortoise won the race.Ī successful deposit insurance system is more like the tortoise than the hare. When he awoke, the tortoise, who had plodded on slowly but steadily, was nearing the finish. The hare was much faster than the tortoise, but, after sprinting ahead in the opening stretch, he lay down to take a nap, confident of his ability to outrun his opponent. IN AESOP'S fable about the hare and the tortoise, the tortoise accepted the hare's challenge to a race.

If it is adequately funded and if other safeguards-such as a strong bank A deposit insurance system can contribute to financial stability, but only

A central bank like the federal reserve in the united states can help banks survive a bank run by