In this paper, we exploit a natural experiment in which thrifts in several states witnessed an exogenous reduction in supervisory attention to assess the effect of supervision on financial institutions' willingness to take risk. We show that the affected institutions took on much more risk than...

In this study, I model the predictors and manifestations of bank stress during the financial crisis using a Multiple Indicator Multiple Cause model. Unlike most early warning models that predict failure probabilities, this paper develops a framework for predicting a broader notion of bank stress...

We extract an index of interest rate spreads from various money market segments to assess the level of funding stress in real time. We find that during the 2007–2009 financial crisis, money markets switched between low and high stress regimes except for brief periods of extreme stress....