"This paper studies bank regulation in the presence of deposit insurance, where banks have private information on their own ability and their investment strategy. Banks choose the mean and variance of their portfolio return. Regulators wish to control banks' risk choice, even though all agents...

Does growing commercial-bank reliance on Federal Home Loan Bank (FHLBank) advances increase expected losses to the Bank Insurance Fund (BIF)? Our approach to this question begins by modeling the link between advances and expected losses. We then quantify the effect of advances on default...

Legislative and regulatory actions taken in response to the financial turmoil which occurred between 2007 and 2009 expanded the extent to which financial institution liabilities were protected by federal government guarantees: i.e., these actions expanded the federal financial safety net. How...

Linear programming is an important method for computing solutions to private information problems. The method is applicable for arbitrary specifications of the references and technology. Unfortunately, as the cardinality of underlying sets increases the programs quickly become too large to...

Banks were substantially deregulated during the 1980s. Interest costs rose faster than operating expenses (capital, labor) were reduced. As a result, measured technical change in banking was negative: it averaged -0.8% to -1.4% a year over 1977-88. Technical change was measured three different...

The paper presents the results of research conducted as part of the American Enterprise Institute's project on financial services regulation. It is a revision of a paper that later appeared in a volume providing a comprehensive review of financial regulatory policy entitled, Restructuring...

Models of banks operating under limited liability with deposit insurance and employee incentive problems are used to analyze how banker compensation contracts can contribute to bank risk shifting. The first model is a multi-agent, moral-hazard model, where each agent (e.g. a loan officer)...