Ettore Croci, Gérard Hertig, Eric Nowak Decision-Making during the Crisis: Why did the Treasury let Commercial Banks fail? (01 Jan 2015) Available at ECGI: http://ecgi.global/working-paper/decision-making-during-crisis-why-did-treasury-let-commercial-banks-fail
Limited attention has been paid to the comparative fate of banks benefiting from TARP
Capital Purchase Program (CPP) funding and less fortunate banks subject to FDIC
resolution. We address this omission by investigating two core issues.
One is whether
commercial banks that ended up being subject to FDIC resolution received CPP funds.
The other is whether the non-allocation of CPP funds forced viable commercial banks
into FDIC receivership. Our findings show almost no overlap between CPP-funded and
FDIC-resolved commercial banks, but we provide evidence that a significant number of
FDIC-resolved banks could have avoided receivership if they had been allocated CPP
funding. By comparing estimated funding and resolution costs we also show that bailing out more banks would have been cost-efficient. While our results do not allow for any policy suggestion on the optimality of bail-outs per se, they suggest that once a bail-out program is already on the table, it is better to err on the side of rescuing too many rather than too few banks.
Starting from the well-evidenced fact that banks with shareholder-focussed corporate governance fared worse in the financial crisis than those without, this paper considers various initiatives and proposals to re-orient board rules in relation to...Read more
We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after persistently...Read more
The relationship between changes in GDP and unemployment during the 2008 financial crisis differed significantly from previous experiences and across countries. We study firm-level decisions in France, Germany, Japan, the UK, and the US. We find...Read more
This paper uses the staggered adoption of the Sarbanes-Oxley Act of 2002 for a difference-in-difference identification of the impact of corporate governance on hedging. In a large panel of listed US firms, we focus on two indexes of the legally...Read more