investigate two increasingly significant margins of adjustment in credit markets: banks' ability to sell loans and shadow bank … following bank capital shock. Recovery is also faster, because profitable loan sales (e.g., securitization) allow banks to build …Existing macroeconomic models focused on bank balance sheet lending are deficient because they do not account for the …

. Empirically, we find that intermediary leverage is negatively aligned with the banks' Value-at-Risk (VaR). Motivated by the …

Traditionally, banks and financial intermediaries borrow short and lend long. This causes a risk of negative net worth … of deposit insurance as a function of capital-asset ratio for a bank with demand liabilities and longer term, default …

. Banks have a low cost of capital due to, say, safety nets or money-like liabilities. We show, however, that this can be a … disadvantage, because it exacerbates soft-budget-constraint problems, making it costly to finance innovative projects. Non-banks … capital, solving soft-budget-constraint problems. Still, non-banks never take over the entire market, but coexist with banks …

Banks are optimally opaque institutions. They produce debt for use as a transaction medium (bank money), which requires … that information about the backing assets - loans - not be revealed, so that bank money does not fluctuate in value …, needed for allocative efficiency. Intermediaries exist to hide such information, so banks select portfolios of information …