Liquidity Requirements, Liquidity Choice and Financial Stability
We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, [...]
Speculative Fever: Investor Contagion in the Housing Bubble
Historical anecdotes of new investors being drawn into a booming asset market, only to suffer when the market turns, abound. While the role of investor contagion in asset bubbles has [...]
Regional Redistribution Through the U.S. Mortgage Market
Regional shocks are an important feature of the U.S. economy. Households' ability to self-insure against these shocks depends on how they affect local interest rates. In the United States, most [...]
Capital Requirements in a Quantitative Model of Banking Industry Dynamics
We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on bank risk taking, commercial bank failure, and market structure. We propose a market [...]
Understanding Bank Risk through Market Measures
If we want to stop crises, we have to describe when we will say “good enough” and stop trying to fix things in the name of crisis prevention. My premise: [...]
It Takes a Village to Maintain a Dangerous Financial System
I discuss the motivations and actions (or inaction) of individuals in the financial system, governments, central banks, academia and the media that collectively contribute to the persistence of a dangerous [...]
Will TLAC regulations fix the G-SIB too-big-to-fail problem?
The efficacy of the Financial Stability Board's proposed requirement for minimum “total loss absorbing capacity” (TLAC) at global systemically important banks (G-SIBs) is assessed using a stylized model of a [...]
On the Distribution of the Welfare Losses of Large Recessions
How big are the welfare losses from severe economic downturns, such as the U.S. Great Recession? How are those losses distributed across the population? In this paper we answer these [...]
Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record
Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? We look at the American historical experience in an attempt to [...]
How prompt was regulatory corrective action during the financial crisis?
This paper empirically investigates the incidence of regulatory forbearance during the financial crisis. Using an option pricing technique in concert with valuation data gathered from failed bank sales, I find [...]