of a financial crisis: 1) Regulation creates two categories of financial institutions. The first class faces greater … subsidized funds to make riskier investments (including investments in the second class) without regulation compensating for … moral hazard; and ii) displacement, which occurs when subsidized competition pushes the second class into riskier market …

removing barriers to bank entry on bank competition and economic growth. As governments were not concerned about systemic … stability in this period, we are able to isolate the effects of bank competition from those of state implicit guarantees. We … states that retained state bank chartering policies. We argue that the fiercer bank competition following the introduction of …