In a global game, I show that creditor bailins, when well-designed, can attain the exact same level of bank stability as costly creditor bailouts. This result holds for both risk-averse and risk-neutral creditors. Because bailouts are costly but do not necessarily provide a stability advantage,...

Can banks exploit the political economy to generate revenue? If bank creditors (local depositors) are voters, the bank's capital structure can act as a tool to impact the electorate and thus bail-outs by changing the relative group size of voters who favor as opposed to object bailouts.As the...

Confronted with a failing firm, a politician sets a bailout to maximize his reelection chances. The voters among the firm’s stakeholders reward him for the bailout, while the remaining voters punish him in the elections since they finance the bailout via taxes. The firm also employs non-voting...