aftermath of bank runs and other financial crises. In an environment where it is economically efficient to make illiquid … limited-liability regime. This example illustrates the beneficial constraint-relaxation effect of a bailout but abstracts from …

system; any preset resolution system will be abandoned for a bailout if it would produce socially unacceptable loss … done ad hoc through Congress or should bailout authority be institutionalized in an agency? And second, should creditors of … bailed out firms be forced to accept less than full payment (or take a “haircut”) as part of the bailout? Ensuring …

We study the stability of the banking system after a mortgage shock when a discretionary bailout policy is applied … the alternatives for most shock/bailout pairs. The medium-sized banks policy performs the worst and may be feasible only … for a small number of low shock/low bailout probability pairs. We identify a threshold level after which the bailout costs …

We provide a theory to investigate the implications of time-varying bailout policy for rational bubbles in an infinite … implications of the time-varying bailout policy. We find that the optimal bailout policy is leaning against the wind, striking a …

risks. In this paper we show empirically that implicit guarantees lead to more leverage and to a lower quality of bank … analysis combines bank balance sheet information from 92 countries with Fitch Support Ratings and World Bank survey data on …