This paper examines cross-subsidy, moral hazard, and bank liability issues related to the provision of federal deposit insurance by "rerunning" its implementation, i.e., determining fair premium values, over the period 1927-1932. The pre-1933 period was characterized by historically high asset-price volatility, a large number of bank failures, and a weak federal safety net. In this economic context, we find a high degree of self-insurance on the part of the banks in our sample, both in terms of higher overall capital levels and a strong correlation between capital levels and asset volatility. Potentially large, regional cross-subsidies among banks were also found. Journal of Economic Literature Classification Number: G21.

We study the frequency of prime rate changes. We model the prime rate as a time-series variable that can be changed only at some cost. This yields a logit model in which the probability of a prime rate change is a function of market variables. We test this model using data from a micro data set that gives the dating of prime rate changes. The results indicate that adjustment costs are important to the prime rate adjustment process, and that changes in exogenous variables have a significantly larger effect on the probability of a prime rate increase than decrease.

The data base compiled during the norming of the Third Edition of the Test of Understanding College Economics (TUCE III) (Saunders, 1994) contains information from 40 instructors of introductory microeconomics courses at 26 different schools who used the posttest score to determine some part of their students' course grade. Of these students, 1,896 answered 30 questions on micro TUCE III both at the beginning (pretest) and the end (posttest) of their one-term course. This paper will use a comparison of the preand posttest responses to each alternative on each question by each student to analyze patterns of persistence and change in choosing correct and incorrect responses.' For each student on each question, there are five possible response patterns:

Part 1 Introduction: the financial services industry - depository institutions the financial services industry - insurance companies the financial service industry - securities firms and investment banks the financial services industry - mutual funds the financial services industry - finance companies why are financial intermediaries special risks of financial mediation. Part 2 Measuring risk: interest rate risk I interest rate risk II market risk credit risk - individual loan risk credit risk - loan portfolio and concentration risk foreign exchange risk sovereign risk liquidity risk. Part 3 Managing risk: liability and liquidity management deposit insurance and other liability guarantees capital adequacy product diversification geographic diversification - domestic geographic diversification - international futures and forwards options, caps, floors, and collars swaps, loan sales and other credit management techniques securitization.

A popular explanation for the explosive growth in banks' off-balance sheet (OBS) activities is the avoidance of capital adequacy requirements. Several studies have examined this and other motivations behind bank OBS activities with mixed results. We shed further light on the issue of OBS growth by modelling OBS products as financial innovations subject to a logistic diffusion adoption pattern. Our data also allows us to investigate the impact of important changes in capital adequacy regulations on OBS diffusion rates. We find that changes in capital requirements have had no consistent impact on the speed of diffusion across OBS activities.