Twenty years ago it was commonly believed that deposit insurance had put an end to banking instability. But now quite the opposite seems to be the case, particularly as the idea of insuring bank debt has spread from the United States to other countries and to international protection through International Monetary Fund largesse.

The history of banking crises worldwide during the last 20 years reveals how damaging safety nets can be. Though some see the recent experience as proof of banks' inherent instability, the last 20 years, when contrasted to earlier eras, stands out as a uniquely unstable and costly era, with events that have shown the flaws in bank safety nets.

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