The Capitalism and Freedom in the Twenty-First Century Podcast Banking Systems and Crises from Deposit Insurance to Stablecoins with Charles Calomiris | Hoover Institution
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Mar 27, 2026 
Charles Calomiris, Emeritus Professor of Finance known for work on banking, financial history, and regulation. He debates why banking crises persist, questions deposit insurance and traditional run models, and explores political causes of fragility. He compares Canada and the U.S., critiques post‑2008 reforms, and discusses stablecoins, narrow banks, and future chartering.
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Bank Runs Respond To Loan Risk Not Just Panic
- Bank runs are not pure coordination failures; depositors react to observable shocks about loan portfolio value and begin withdrawing well before insolvency.
- Charles W. Calomiris notes withdrawals are usually gradual, disciplining banks to deleverage and raise cash rather than causing instantaneous collapse.
FDIC Didn’t Immediately End 1930s Bank Instability
- Federal deposit insurance did not single-handedly end banking instability in the 1930s; the 1933 bank holiday and supervisory resolution preceded FDIC operations.
- Calomiris emphasizes FDIC began in 1934 while many problem banks were already resolved via reopenings or government assistance.
Deposit Insurance Shifts Losses And Weakens Discipline
- Shifting loss allocation from bank shareholders to taxpayers via deposit insurance and bailouts reduces banks’ risk management incentives and raises long-run social losses.
- Calomiris argues borrowers and bankers lobby for protection, producing riskier banks and bigger fiscal costs in crises like East Asia and Mexico.
