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Understanding How Banks Operate

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Published May 12, 2022

In the 1930s, economic uncertainty among the public led to huge runs on US banks. The federal government responded by creating deposit insurance and asset regulations. As more and more crises occurred, bailouts and further regulations have become commonplace.

Discussion Questions:

  1. Are the best solutions to problems always politically feasible? Why?
  2. In what ways has the Federal Reserve assumed a larger role than it has in the past?

Additional resources:

  • Watch “How Government Policy Inflates Health Care Costs: The Curse of Cross-Subsidies,” with John Cochrane on PolicyEd. Available here.
  • Watch “Does Government Debt Matter Anymore?” with John Cochrane on PolicyEd. Available here.
  • Read “Why Hasn’t the Fed Done More to Fight Inflation?” by John Cochrane via Chicago Booth Review. Available here.