The CLASS model is a top-down capital stress testing framework that projects the effect of different macroeconomic … industry capital gap relative to a target ratio at different points in time under a common stressful macroeconomic scenario …. This estimated capital gap began rising four years before the financial crisis and peaked at the end of 2008. The gap has …

The proposal for banks to issue contingent capital that must convert into common equity when the banks’ stock price … capital prices. Multiple or no equilibrium arises because both equity and contingent capital are claims on the assets of the … to exist, mandatory conversion cannot result in any value transfers between equity holders and contingent capital …

concentration in capital ownership causes a transition to an unequal steady state. Capital management introduces a novel equity … on long-run wealth inequality. Incorporating capital management into a standard RamseyCass-Koopmans model generates … substantial long-run inequality: the majority of the population works and holds no capital, while a small minority holds a large …

heterogeneity in the willingness of banks to allocate capital during adverse times. …

suggests that although bank lending contracted during the crisis, bond financing actually increased to make up much of the gap …