This essay shows that government credit-allocation schemes generate incentive conflicts that undermine the quality of bank supervision and eventually produce banking crisis. For political reasons, most countries establish a regulatory culture that embraces three economically contradictory...

As financial institutions and markets transact more and more cross-border business, gaps and flaws in national safety nets become more consequential. Because citizens of host (home) countries may be made to pay for mistakes made in the home (host) country, Basel's lead-regulator paradigm...

This paper makes three contributions. First, I report information on the size of the Japanese financial crisis. Drawing principally on work by Fukao (2003) and Doi and Hoshi (2003) I estimate that the current taxpayer liability for losses incurred but yet to be recognized is likely to be at...

We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to survive a run. The incomplete information means that the...

This paper supplies an agency-cost and contestable-markets perspective on the financial policies that triggered the Asian financial crisis. The agency-cost analysis hypothesizes that individual-country regulators knew that politically directed loans had made their banks insolvent, but...

This paper argues that the debt forgiveness provided by the U.S. consumer bankruptcy system helped stabilize employment levels during the Great Recession. We document that over this period, states with more generous bankruptcy exemptions had significantly smaller declines in non-tradable...