increase, engage, capital, protect, failures, fail, interests, efficiently,
expensive, align, protect, insurance, defraud, losses, closes

Bank managers and owners must not be given incentives to{{U}} (1) {{/U}}in behavior detrimental to the whole banking system. They must either run their banks{{U}} (2) {{/U}}or face failure. Deposit insurance is meant to{{U}} (3) {{/U}}the banking system, not poorly run banks. The fact is that bank{{U}} (4) {{/U}}are often self-inflicted by owners and managers who mismanage. Such losses can be reduced if the supervisor{{U}} (5) {{/U}}the bank before it fails totally, since delaying a bank closing or sale tends to increase{{U}} (6) {{/U}}and to spread them to the banking system as a whole.
Even without deposit insurance, bank managers may pursue their own{{U}} (7) {{/U}}at the expense of the bank. But the problem gets worse with{{U}} (8) {{/U}}. Managers may indulge in such excesses as high salaries,{{U}} (9) {{/U}}buildings, and lavish furnishings. To combat this problem, managers could receive an "incentive-compatible contract" to{{U}} (10) {{/U}}their interests with those of the owners. When the hank is sound, managers can best{{U}} (11) {{/U}}their professional reputations by keeping it so. However, if a bank begins to{{U}} (12) {{/U}}and no proper incentive exists to protect its{{U}} (13) {{/U}}, managers may join owners in being prepared to gamble for recovery by making high-risk loans or to loot or{{U}} (14) {{/U}}the bank. At that point deposit insurance could{{U}} (15) {{/U}}their opportunities to do so.