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Conference Paper
Liquidity risk, liquidity creation and financial fragility: a theory of banking
Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they are uncertain about their ability to continue to attract or retain funding. We argue that financial intermediation can resolve these liquidity problems that arise in direct lending. Banks enable depositors to withdraw at low cost, as well as buffer firms from the liquidity needs of their investors. We show the bank has to have a somewhat fragile capital ...
Working Paper
Financial Fire Sales: Evidence from Bank Failures
Theory suggests the reduction in financing capacity after the failure of a financial intermediary can reduce the value of financial assets. Forced sales of the intermediary's assets could consume liquidity, depressing the liquidation value of the assets of healthy intermediaries and causing contagious runs. These financial fire sales can both cause, and exacerbate, real fire sales, the focus of previous studies. This paper investigates the relevance of financial fire sales using new datasets covering bank failures during the farm depression in the United States just before the Great ...
Conference Paper
Loan sales, implicit contracts, and bank structure
Conference Paper
Has financial development made the world riskier?
Conference Paper
Liquidity and the rise of financial intermediation
Journal Article
The credit crisis and cycle-proof regulation
This article was originally presented as the Homer Jones Memorial Lecture, organized by the Federal Reserve Bank of St. Louis, St. Louis, Missouri, April 15, 2009.
Conference Paper
Can the tide turn?
Conference Paper
Some evidence on the separation of commercial and investment banking