Strahan, Philip E. - In: Annual Review of Financial Economics 5 (2013) 1, pp. 43-61
Governments cannot credibly commit to eschew bailouts of creditors when large financial institutions become distressed. This too-big-to-fail (TBTF) problem distorts how markets price securities issued by TBTF firms, thus encouraging them to borrow too much and take too much risk. TBTF also...