Should policy makers be prevented from bailing out investors in the event of a crisis? I study this question in a model of financial intermediation with limited commitment. When a crisis occurs, the policy maker will respond by using public resources to augment the private consumption of those...

In a global game, I show that creditor bailins, when well-designed, can attain the exact same level of bank stability as costly creditor bailouts. This result holds for both risk-averse and risk-neutral creditors. Because bailouts are costly but do not necessarily provide a stability advantage,...