An overview of an October 1993 conference that examined the costs, causes, and consequences of credit allocation by the federal government, covering both the broad rationale for government intervention in U.S. credit markets and a number of specific programs and regulations.

Recent advances in asset pricing-the reduced-form approach to pricing risky debt and derivatives-are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. The authors find that credit spreads on both fixed- and floating-rate subordinated debt provide...

An analysis of the 1987 change in control at Mellon, which was one of only a few banks with a large shareholder. It finds that the large shareholder did not monitor the firm extensively before it experienced performance difficulties, but was able to enforce a management change when problems...

An examination of the continuing strength of the loan sales market, documenting its growth during the latter half of the 1980s, its subsequent downturn in the early 1990s, the effect of merger and acquisition activity, and the impact of the 1990-91 recession, plus a discussion of how these...

Stock and bond prices contain all sorts of information about investors’ beliefs and expectations. For example, the interest rate on bank debt not insured by the FDIC has information about the health of the banks issuing the debt. Unfortunately, difficulties in extracting information from these...

Deregulation and financial consolidation have led to the development of financial holding companies—allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella—and the Federal Reserve has been named supervisor...

An examination of the role of foreign banks in the loan sales market, finding that the motives for loan sales and purchases differ between U.S. and foreign-owned banks and between foreign banks of different regions, which is consistent with foreign banks' using the market for diversification.

A documentation of some recent changes in the market for loan sales, using a tobit model to relate quantities of loans bought and sold to bank size, capital, risk, and funding mode.

Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. Crisis interventions are fraught with trade-offs: What are the costs of doing nothing? What is the probability that markets will...