How do regulators design bank capital requirements when banks can misreport the value of their assets? We show that the answer depends critically on the existence of secondary markets for bank assets. Without secondary markets, capital requirements based on banks' reporting are more socially...

We model the failed bank resolution process as a repeated game between a utility-maximizing government resolution authority (RA) and a profit-maximizing banking industry. Limits to resolution technology and political/economic pressure create incentives for the RA to bail out failed complex...

We study large, long-term private equity investments in 87 publicly traded commercial banks made possible by a loosening of Federal Reserve regulations in 2008. Bank shareholders earned premiums upon the announcement of the PE investments, positive abnormal returns persisted throughout the...

We document the prevalence of promotional pricing of credit card debt in the U.S. and develop an analytic framework to study how interest rates on multiperiod credit line contracts should be set when debt is unsecured and defaultable. We show that according to the basic theory of unsecured...

This paper studies banks' decision whether to borrow from the interbank market or to sell assets in order to cover liquidity shortage in presence of credit risk. The following trade-off arises. On the one hand, tradable assets decrease the cost of liquidity management. On the other hand,...

We analyze under what conditions credit markets are efficient in providing loans to entrepreneurs who can start a new project after previous failure. An entrepreneur of uncertain talent chooses the riskiness of her project. If banks cannot perfectly observe the risk of previous projects, two...

This paper analyzes the role of expected income in entrepreneurial borrowing. We claim that poorer individuals are safer borrowers because they place more value on the relationship with the bank. We study the dynamics of a monopolistic bank granting loans and taking deposits from overlapping...