Bank Nerd Corner Why Don’t Uninsured Deposits Take Losses Anymore?
Bank Nerd Corner welcomes Michael Ohlrogge, a professor of Law at New York University’s School of Law, to talk about the realities of uninsured deposits, deposit insurance and bank failures.
Professor Ohlrogge’s paper, “Why Have Uninsured Depositors Become De Facto Insured?,” explores how usual, or unusual, it is for uninsured depositors to take losses when a bank fails.
Ohlrogge’s research found that prior to 2008, it was common for uninsured depositors to take a haircut on their uninsured funds when their institution failed. Today, when a bank fails, it’s very normal for most, if not all, of the uninsured deposits to be assumed by the acquirer.
The shift to de facto insurance coverage for all deposits coincides with a dramatic increase in the Federal Deposit Insurance Corp.’s costs to resolve failed banks. Professor Ohlrogge and Kiah also discuss the potential implications of his paper in light of Congress considering raising the deposit insurance coverage limit.
Read “Why Have Uninsured Depositors Become De Facto Insured?” here: https://nyulawreview.org/issues/volume-100-number-2/why-have-uninsured-depositors-become-de-facto-insured/
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Follow Kiah:
LinkedIn: https://www.linkedin.com/in/khaslett/
Twitter: https://twitter.com/khaslett
Follow Professor Ohlrogge:
Linkedin: https://www.linkedin.com/in/michael-ohlrogge-70a6a76/
Twitter: https://x.com/M_Ohlrogge