Much of the discussion about banking and commerce in America has failed to make several crucial distinctions and has not accounted for many arrangements that have promoted the mixing of these activities. We investigate the history of banking and commerce in the United States, looking both at...

Theory suggests that banks' private information about borrowers lets them hold up borrowers for higher interest rates. Since hold-up power increases with borrower risk, banks with exploitable information should be able to raise their rates in recessions by more than is justified by borrower risk...

The link between financial market concentration and stability is a topic of great interest to policymakers and other market participants. Are concentrated markets - those where a relatively small number of firms hold large market shares - inherently more prone to disruption? This article...

It has long been recognised that banks' simultaneous provision of monitoring and liquidity services is advantageous, but leaves them susceptible to liquidity shocks that may culminate in a system failure. Because a system failure is costly, this provides a rationale for adopting arrangements,...

This paper looks at the advantages and disadvantages of mixing banking and commerce, using the liquidity approach to financial intermediation. Bringing a nonfinancial firm into a banking conglomerate may be advantageous because it makes it easier for the bank to dispose of assets seized in a...

There has been a great deal of interest among researchers on the votingrights of nonfinancial firms' stock controlled by Japanese and German banks. In the United States, little attention has been devoted to this issue because banks traditionally have been barred from making equity investments in...

This paper reviews the theoretical literature on bank capital regulation and analyses some of the approaches to redesigning the 1988 Basel Accord on capital standards. The paper starts with a review of the literature on the design of the financial system and the existence of banks. It proceeds...

This paper analyzes the potential effects of commercial banks' expansion into the securities business, taking into account the underlying conditions assumed by the modern literature to explain the existence of financial intermediaries. The analysis focuses on the gains claimed to emerge with...

The model presented in this paper is a particular case of the principal-agent problem. An entrepreneur has an investment project whose returns depend on his effort, which is not observable by the financier. After determining the optimal contract that is used to finance such a project, I show...

This paper uses an intermediation model to study the efficiency and welfare implications of both banks' required capital-asset ratio and the regulation that limits, and in some countries forbids, banks' investments in equity to a certain proportion of each firm's capital. There are two sources...