9.3The Government Safety NetO1. three targets(1) to protect investors.(2) to protect bank customers frommonopolistic exploitation(3) to ensure the stability of the financialsystem14-6
14-6 9.3 The Government Safety Net • 1. three targets: • (1) to protect investors. • (2) to protect bank customers from monopolistic exploitation. • (3) to ensure the stability of the financial system
TheGovernmentSafetyNeta2. the lender of last resortan institution would be capable of makingloans to prevent the failure of solvent banks.and could provide liguidity in sufficientquantities to prevent or end a financial panic3.depositinsurancea depositor will receive the full accountbalance up to some maximum amount, even ifa bank fails14-7
14-7 The Government Safety Net • 2. the lender of last resort • an institution would be capable of making loans to prevent the failure of solvent banks, and could provide liquidity in sufficient quantities to prevent or end a financial panic • 3. deposit insurance • a depositor will receive the full account balance up to some maximum amount, even if a bank fails