Systemic banking crises have placed enormous pressure on national governments to intervene. The empirical literature, however, is inconclusive on what an optimal bailout program should look like to mitigate the negative consequences of government interventions in the banking sector. We find...

The systemic banking crises placed enormous pressure on national governments to intervene. The empirical literature is mute on what the optimal bailout program should look like to mitigate the negative consequence of government intervention in the banking sector. We document that, in general,...

We study the effectiveness of three common bank resolution mechanisms: bailouts, bank sales, and ‘bad banks’. We first apply the financial fragility model of Goodhart et al. (2005, 2006a) to analyze the impact of these resolution mechanisms on bank behavior. We then use a novel bank-level...