Choices in Banking Policy

The central purpose of bank regulation is to protect the actuarial soundness of the federal safety net – deposit insurance, discount window lending, and the Fed’s oversight of the payments system. Some regulatory changes could improve current banking policy by reducing regulatory burden while maintaining the soundness of the existing safety net. Beyond these changes, however, society faces a trade-off: further easing of the costs of bank regulation would require limiting the scope of the federal safety net.