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Chicago Fed Letter, No. 45, May 1991
Subordinated Debt: The Overlooked Solution for Banking

In a move reminiscent of the 1930s, the governor of Rhode Island recently declared a state banking holiday. A short time ago, the Bank of New England became the fourth large bank failure since 1984, estimated to cost the insurance fund more than $1 billion. Rumors persist that the FDIC fund may be insolvent if existing losses at operating but insolvent, or soon-to-be-insolvent, institutions are considered. All of this follows the recent savings and loan debacle, which may cost taxpayers something approaching $200 billion.



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