techniques, we find that the market had largely deciphered on its own which banks would have capital gaps before the stress test … results were revealed, but that the market was informed by the size of the gap; given our proxy for the expected gap, banks … the financial panic by producing vital information about banks. Our findings also contribute to the academic literature on …

suggest possible solutions. We begin this paper by explaining why governance of banks differs from governance of non …

in the one-month and three-month Libor. We explain such stress by modeling leveraged banks' precautionary demand for … turn, banks hoard liquidity and decrease term lending as their rollover risk increases over the term of the loan. High …

reserve requirements. We also examine the potential for balance-sheet cost frictions to distort banks' lending decisions. We …