Working Paper

Bailing Out (Firms') Uninsured Deposits: A Quantitative Analysis

Abstract: We document two novel stylized facts about uninsured deposits and bank failures: (i) firms hold more uninsured deposits than households, and (ii) uninsured depositors do not suffer losses in 94 percent of bank failures. We construct a quantitative general equilibrium model designed around these facts. We characterize the marginal benefits of increased insurance for firms' and households' deposits separately, finding higher benefits for household insurance. Quantitatively, the welfare gains from increasing insurance arise primarily from the reduction in bank runs driven by the higher limit on households' deposits. Reducing bailouts increases bank failures due to runs and generates severe macroeconomic effects.

JEL Classification: E20; G21; G28; G32;

https://doi.org/10.29338/wp2026-16

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2026-09-28

Number: 2026-16