keeping each bank : a final checklist

just because the peril of a nationwide bank run has been overcome does not mean that each banker can stop worrying about his bank ’s safety . Numerous reforms have been introduced by government to alleviate the instability of laissez faire banking :
1- Regulation of bank formation and activity.For decades,either state or federal authorities have set down conditions under which banks could be formed-the minimum amount of capital they must have,etc,Bank examiners periodically scrutinize bank assets and pass on the bank,s solvency,always keeping in mind that an ounce of prevention is worth a pound of cure.
2. Formation of federal reserve system. The next great step forward was the establishment of a central bank,whose emergency function is to stand as a Rock of Gibraltar in time of panic,to be ready to use the full monetary powers of the government to stem collapse of the banking system.The normal vital function of a central bank is to control money supply and credit conditions.
3. Government insurance of bank deposits.Following the bank crisis of 1933,the FFIC was belatedly set up to insure the safety of all bank deposits.
The importance of this measure can hardly be exaggerated.From now on,most banks will be closed by bank examiners and government authorities,not by the panicky behavior of depositors whose fears bring on the very contingency they are most afraid of.
A single bank need no longer fear that its reputation is compromised simply by being brought into question.(In the 1970s,the only banks to fail are those involving fraud or gross negligence;their depositors are protected by the FDIC;and their failure no longer sets off a domino collapse of other banks.