Financial Crises are typically associated with a loss of confidence in financial intermediaries. This loss of confidence often manifests itself in a sharp fall in the prices of securities issued by financial intermediaries. We focus on the market for asset-backed securities issued by banks and...

Banks and financial intermediaries that originate loans often sell some of these loans or securitize them in secondary loan markets and hold on to others. New issuances in such secondary markets collapse abruptly on occasion, typically when collateral values used to secure the underlying loans...

We analyze the extent to which reputational concerns may overcome moral hazard problems in credit markets. In such markets, loan contracts are common, and with loan contracts, borrowers have incentives to take on high levels of risk if lenders cannot observe the types of projects in which...

We examine the quantitative importance of financial market shocks in accounting for business cycle fluctuations. We emphasize the role financial markets play in reallocating funds from cash-rich, low productivity firms to cash-poor, high productivity firms. Using evidence on financial flows at...

We examine the quantitative importance of financial market shocks in accounting for business cycle fluctuations. We emphasize the role financial markets play in reallocating funds from cash-rich, low productivity firms to cash-poor, high productivity firms. We use evidence on financial flows to...

We describe a novel channel through which credit frictions driven by adverse selection problems cause financial shocks to lead to fluctuations in real activity. When firms have private information about their default risk, firms with high probability of default have stronger incentives to run up...

The volume of new issuances in secondary loan markets fluctuates over time and falls when collateral values fall. We develop a model with adverse selection and reputation that is consistent with such fluctuations. Adverse selection ensures that the volume of trade falls when collateral values...