The article "Continental Illinois: The Making of a Liquidity Crisis", demonstrates the inconsistencies of the current regulatory policy in effect by the federal Reserve System, which in turn has hurt banks like Continental Illinois National Bank and Trust Co., who had problems with bad loans that they produced in the early 80's, which lowered earning drastically and decreased the market value of bank equity, undermined customer confidence, and brought about net deposits outflows. By the end of 1984, Continental's deposits had shrunk by almost 12 billion and the bank had been effectively…
