What are the effects of payout restrictions on bank risk-shifting? To answer this question, we exploit the restriction policies imposed during the Covid-crisis on US banks as a natural experiment. Using a highfrequency differences-in-differences empirical strategy, we show that, when share...

We examine sources of systemic risk (threshold size, complexity, and interconnectedness) with factors constructed from equity returns of large financial firms, after accounting for standard risk factors. From the factor loadings and factor returns, we estimate the implicit government subsidy for...

We summarize and evaluate Fannie Mae and Freddie Mac's credit risk transfer (CRT) programs, which have been used since 2013 to shift a portion of credit risk on more than $1.8 trillion of mortgages to private sector investors. We argue that the CRT programs have been successful in reducing the...

Using a synthetic control research design, we find that "living will" regulation increases a bank's annual cost of capital by 22 basis points, or 10 percent of total funding costs. This effect is stronger in banks that were measured as systemically important before the regulation’s...

Does the intensity of supervision affect quantifiable outcomes at supervised firms? We develop a novel proxy to identify plausibly exogenous variation in the intensity of supervision across large U.S. bank holding companies (BHCs), based on the size rank of a BHC within its Federal Reserve...

We measure bank supervision using the database of supervisory issues, known as matters requiring attention or immediate attention, raised by Federal Reserve examiners to banking organizations. The volume of supervisory issues increases with banks' asset size, especially for the largest and most...

We estimate the cost of capital for the banking industry and find that while the cost of capital soared for banks in the financial crisis, after the passage of the Dodd-Frank Act, the value-weighted cost of capital for banks fell differentially more than did the cost of capital for nonbanks. The...

We argue that post-crisis bank regulation can explain large, persistent deviations from parity on basis trades requiring leverage. Documenting the financing cost and balance sheet impact on a broad array of basis trades for regulated institutions, we show that the implied return on equity on...

U.S. bank holding companies (BHCs) have developed a very significant nonbank footprint over the years, adding thousands of specialty lenders, brokers and dealers, asset management, and insurance subsidiaries to their organizations. These nonbank subsidiaries represent a sizeable share of...

Prior to the Great Depression, regulators imposed double liability on bank shareholders to ensure financial stability and protect depositors. Under double liability, shareholders of failing banks lost their initial investment and had to pay up to the par value of the stock in order to compensate...