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Bank failures are widely feared because depositors may suffer losses in the value of their deposits and restrictions in access to their deposits. In the United States, this is not true for insured deposits, which are made fully available to depositors almost immediately. But both problems may occur for uninsured deposits. One way to mitigate liquidity loss to uninsured depositors is to make the estimated recovery value of their deposits quickly available to them by the Federal Deposit Insurance Corporation (FDIC). Such a policy would greatly enhance the FDIC's ability to resolve large bank insolvencies without having to protect uninsured depositors through too‐big‐to‐fail policies. (JEL G21, G28, G10)

A number of emerging economies are considering directing public resources to developing an international financial center (IFC). They are doing so because of the perceived advantages of IFCs, including high value added, quick development, and low fixed-cost plant and equipment. But being an IFC also has costs, including high fragility, spillover of problems from the center to the domestic economy, and quick departure of footloose human capital. This paper evaluates the benefits and costs of becoming an IFC, enumerates the characteristics of IFCs, traces the history of IFCs, and describes recent changes in the ranking of major IFCs. It concludes that this may not be an opportune time for emerging economies to devote public resources to developing an IFC.

The banking crises experienced in many countries worldwide in recent years can often be attributed, at least in part, to state owned or controlled banks. These banks are often not typically banks in the traditional sense, but are effectively arms of the government to direct credit to favored borrowers in pursuit of economic, political, or social objectives. This frequently results in costly misallocation of resources. In addition, because their bottom line is not necessarily profitability, many consistently generate losses and continue to operate while economically insolvent. They can do this because all of their deposit liabilities are perceived to be fully guaranteed. Thus, their negative net worths are effectively off-budget liabilities of the government. At some point, taxpayers become reluctant to bear this increasing burden and the government is forced to recapitalize their institutions explicitly. To avoid repetitions of these costly policies, state owned banks should be completely privatized.

Banking reform has always been a part of the political agenda, although policy tends to focus on the specific concerns of the public at the time of crisis; as times (and crises) change, so does the direction of public policy. The result has often been that change instituted in answer to one crisis has precipitated ensuing crises. The recent number of bank failures and resulting losses have caused public attention to once again focus on the banking system and what public policy can do to repair existing problems. In this light, Kaufman reviews the history, circumstances, and results banking reform in the 60 years since passage of the Glass-Steagall Act and speculates on the likelihood and direction of future reform.