The financial crisis of 2007-2008 led to extraordinary government intervention in firms and markets. The scope and depth of government action rivaled that of the Great Depression. Many traded markets experienced dramatic declines in liquidity leading to the existence of conditions normally...

Most banks are subject to corporate income taxes while special purpose vehicles that hold securitized loans are corporate tax-exempt. We present a model that shows how this tax asymmetry creates an incentive for banks to sell loans. However, because moral hazard costs arise when banks...