The Term Auction Facility (TAF), the first auction-based liquidity initiative by the Federal Reserve during the global financial crisis, was aimed at improving conditions in the dollar money market and bringing down the significantly elevated London interbank offered rate (Libor). The...

This paper examines the effects of taxation on the liability structure of banks. We derive testable predictions from a dynamic model of optimal bank liability structure that incorporates bank runs, regulatory closure and endogenous default. Using the supervisory data provided by the Bank of...

This paper examines the international diversification benefits subject to portfolio constraints --- in particular, constraints on short selling. We show that the international diversification benefits remain substantial for U.S. equity investors when they are prohibited from short selling in...

Banks strategically choose and dynamically restructure deposits and non-deposit debt in response to the minimum requirements on total capital and tangible equity. We derive the optimal strategic liability structure and show that it minimizes the protection for deposits, conditional on capital...