The recent mortgage crisis has resulted in several bank failures as the number of mortgage defaults increased. The current Basel I capital framework does not require banks to hold sufficient amounts of capital to support their mortgage lending activities. The new Basel II capital rules are...

Using modern duality theory to recover technologies from data can be complicated by the risk characteristics of production. In many industries, risk influences cost and revenue and can create the potential for costly episodes of financial distress. When risk is an important consideration in...

The authors argue for a shift in the focus of modeling production from the traditional assumptions of profit maximization and cost minimization to a more general assumption of managerial utility maximization that can incorporate risk incentives into the analysis of production and recover...

Superseded by Working Paper 15-20. Monetary economists have long recognized a tension between the benefits of fractional reserve banking, such as the ability to undertake more profitable (long-term) investment opportunities, and the difficulties associated with fractional reserve banking, such...

This paper conducts an in-depth analysis of structured finance asset-backed securities collateralized debt obligations (SF ABS CDOs), the subset of CDOs that traded on the ABS CDO desks at the major investment banks and were a major contributor to the global financial panic of August 2007....

Earlier studies found little evidence of scale economies at large banks; later studies using data from the 1990s uncovered such evidence, providing a rationale for very large banks seen worldwide. Using more recent data, the authors estimate scale economies using two production models. The...

The authors examine investors' reactions to announcements of large seasoned equity offerings (SEOs) by U.S. financial institutions (FIs) from 2000 to 2009. These offerings include market infusions as well as injections of government capital under the Troubled Asset Relief Program (TARP). The...

The authors show that the regulation of bank lending practices is necessary for the optimal provision of private liquidity. In an environment in which bankers cannot commit to repay their creditors, the authors show that neither an unregulated banking system nor narrow banking can provide the...

Self regulation encouraged by market discipline constitutes a key component of Basel II’s third pillar. But high-risk investment strategies may maximize the expected value of some banks. In these cases, does market discipline encourage risk-taking that undermines bank stability in economic...

Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia Financial Interdependence in the World's Post-Crisis Capital Markets, Presented by the Global Interdependence Center (GIC) in partnership with the Philadelphia Council for Business...