This paper models bank asset choice when shareholders know more about loan quality than do outsiders. Because of this informational asymmetry, the price of loans in the secondary market is the price for poor quality loans. Banks desire to hold marketable securities in order to avoid liquidating...

Financial regulators must consider the benefits and limitations of pilot studies when pursuing evidence-based decision-making. Although pilot studies may generate new knowledge, they are expensive and often flawed by serious selection and spillover problems. Instead, regulators can often...