M&B3 3rd Edition by Dean Croushore

Exercise 15

When a small bank has fi nancial problems, the banking authorities are likely to close it down, leading to substantial losses for uninsured depositors and the bank's stockholders. Yet a big bank in the same trouble may be saved by the banking authorities. Is this a sensible solution Can it be defended on the grounds of economic effi ciency What about on the grounds of equity (fairness)