"This paper studies bank regulation in the presence of deposit insurance, where banks have private information on their own ability and their investment strategy. Banks choose the mean and variance of their portfolio return. Regulators wish to control banks' risk choice, even though all agents...

Economist Arantxa Jarque and senior editor David A. Price explore an innovation of the Dodd-Frank Act of 2010, which requires the largest and most complex financial institutions to create resolution plans to follow if the institutions fall into severe financial distress. In these plans, or...