"Several recent studies have recommended greater reliance on subordinated debt as a tool to discipline bank risk taking … theoretical model describing how use of a second market-measure of bank risk, in addition to the supervisors own internalized … information, could improve bank discipline. We then empirically evaluate the implications of the model. The evidence suggests that …

We use matched, bank-level panel data on Libor submissions and credit default swaps to decompose bank-funding spreads … and that this premium declined at short maturities following Federal Reserve interventions in bank funding markets. At …