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Essay / Research Paper Abstract
This 3-page paper examines the status of commercial banks, and whether or not the government is doing the right thing in terms of the bailout. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: D0_MTbankanly.rtf
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Unformatted sample text from the term paper:
current status. It seems as though bank failures are becoming the norm. During 2008, Washington Mutual collapsed, as did IndyMac Bank (Adler, 2008). Furthermore, 2008 saw more bank closures at
any time since the savings and loan crisis off the 1980s (Adler, 2008). A glance at the FDICs historical records demonstrate,
however, that in 1934, several years into the Great Depression, there were 14,146 commercial banks across the United States (FDIC, 2008). The number has gradually declined - the most recent
statistics (late 2007) indicate that there were 7,283 institutions remaining (FDIC, 2008). Interestingly enough, however, there were also 78,867 branches, whereas in 1934, there were no branches (FDIC, 2008).
What are the reasons behind the decline? More importantly, does this decrease mean a more efficient banking system? Rajan (1994) indicated that the
commercial bank, which is responsible for accepting deposits, paying them back on demand, providing liquidity and originating loans, maybe has outlived its usefulness. The reasons for this are that companies
have had alternatives to bank borrowing, while technology and deregulation has also given consumers savings options (such as mutual funds) (Rajan, 1994). Rajan didnt agree, however, suggesting that credit origination,
liquidity creation and financial innovation were still necessary for our markets. Fast forwarding 12 years, Wheelock points out that, based on previous
booms and declines, banks in states with large house prices ended up experiencing larger default and following that, failure rates. But then again, Wheelock in 2006 also said banks were
probably cushioned from possible decreases in home prices dropping (Wheelock, 2006). One wonders what his response would be in todays market. Still,
...