Theory suggests that government aid to banks may either reduce or increase systemic risk. We are the first to address this issue empirically, analyzing the Troubled Assets Relief Program (TARP). Analysis suggests that TARP significantly reduced contributions to systemic risk, particularly for...

We present a life cycle view of how systemic risks build during a boom, are realized during the following crisis, and are addressed in the aftermath. We also offer potential explanations of the seemingly irrational behavior by private-sector agents and policy makers. We show how the model...

We examine how bank efficiency during normal times affects survival, risk, and profitability during subsequent financial crises using data from five U.S. financial crises and preceding normal times. We find cost efficiency during normal times helps reduce bank failure probabilities, decrease...

We investigate whether saving Wall Street through the Troubled Assets Relief Program (TARP) really saved Main Street during the recent financial crisis. Our difference-in-difference analysis suggests that TARP statistically and economically significantly increased net job creation and net hiring...

How well does monetary policy affect bank behavior, particularly during financial crises? What is the role of banks in creating asset bubbles that burst and lead to crises? We address these issues by focusing on bank liquidity creation, a comprehensive measure of bank output that accounts for...

We investigate benefits to business borrowers from bank bailouts – specifically the Troubled Asset Relief Program (TARP). Applying difference-in-difference methodology to loan-level data, we find more favorable contract terms in five dimensions – spread, amount, maturity, collateral, and...

Economic agents pursue government funds using political connections, but it is sometimes unclear which types of connections and whose connections matter, and which agents have opportunities to benefit. We address these issues for the over one-half-trillion-dollar Paycheck Protection Program...

This paper empirically examines how capital affects a bank's performance (survival and market share), and how this effect varies across banking crises, market crises, and normal times that occurred in the U.S. over the past quarter century. We have two main results. First, capital helps small...

Governments provide guarantees to banks, such as deposit insurance, often increasing them during financial crises. While risk effects are well researched, impacts on bank output remain largely unexplored. We investigate bank output effects using data from 75 countries on bank liquidity creation,...