I was a regulator in the 1980s, during the savings and loan crisis when all kinds of depository institutions failed in numbers second only to the Great Depression's toll.

During this time I heard one Federal Deposit Insurance Corp. official say they generally lost about 20% of asset value when liquidating a bank. Some people wondered whether, by that measure, banks should be required to hold 20% more capital to cover potential liquidation losses. If so, there would be virtually no solvent banks. Of course, that is not an appropriate standard because it presumes every institution would be liquidated — and value is lost in liquidation that is preserved in a going concern.

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