TY  - JOUR
AU  - Carbo-Valverde,Santiago
AU  - Kane,Edward J.
AU  - Rodriguez-Fernandez,Francisco
TI  - Safety-Net Benefits Conferred on Difficult-to-Fail-and-Unwind Banks in the US and EU Before and During the Great Recession
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16787
PY  - 2011
Y2  - February 2011
UR  - http://www.nber.org/papers/w16787
L1  - http://www.nber.org/papers/w16787.pdf
N1  - Author contact info:
Santiago Carbo-Valverde
Departamento de Teoría e Historia Económica
Facultad de CCEE y Empresariales
Universidad de Granada
s/n E-18071, Granada, Spain
E-Mail: scarbo@ugr.es

Edward J. Kane
2325 E Calle Los Altos
Tucson, AZ 85718
Tel: 520-299-5066
E-Mail: edward.kane@bc.edu

Francisco Rodriguez-Fernandez
Departamento de Teoría e Historia Económica
Facultad de CCEE y Empresariales
Universidad de Granada
s/n E-18071, Granada, Spain
E-Mail: franrod@ugr.es
AB  - This paper models and estimates ex ante safety-net benefits at a sample of large banks in US and Europe during 2003-2008.  Our results suggest that difficult-to-fail and unwind (DFU) banks enjoyed substantially higher ex ante benefits than other institutions. Safety-net benefits prove significantly larger for DFU firms in Europe and bailout decisions less driven by asset size than in the US. We also find that a proxy for regulatory capture helps to explain bailout decisions in Europe. A policy implication of our findings is that authorities could better contain safety-net benefits if they refocused their information systems on measuring volatility as well as capital.
ER  -