The first part of this paper provides a historical perspective on bank risks. Five-year moving average measures of … total risk, market risk, and nonmarket risk are computed for an index of New York banks from 1929-1975 and for an index of … outside New York banks from 1950-1976.We use a carefully constructed series of bank balance sheet data to compute correlations …

deposits excessively fragile in which case there is a role for outside bank capital. Greater bank capital reduces liquidity … creation by the bank but enables the bank to survive more often and avoid distress. A more subtle effect is that banks with … different amounts of capital extract different amounts of repayment from borrowers. The optimal bank capital structure trades …

Bank balance sheet lending is commonly viewed as the predominant form of lending. We document and study two margins of … document the limits of the shadow bank substitution margin: shadow banks substitute for traditional—deposit-taking—banks in … quantitative consequences of several policies on lending volume and pricing, bank stability, and the distribution of consumer …

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 …-insensitive assets. For the economy as a whole, firms endogenously separate into bank finance and capital market/stock market finance …

taking by banks, but increased risk taking by firms. Capital regulation lowers bank leverage but can lead to compensating …We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage … emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset …