Capital Requirements and Bailouts
Fabrizio Perri () and
No 554, Staff Report from Federal Reserve Bank of Minneapolis
We use balance sheet data and stock market data for the major U.S. banking institutions during and after the 2007-8 financial crisis to estimate the magnitude of the losses experienced by these institutions because of the crisis. We then use these estimates to assess the impact of the crisis under alternative, and higher, capital requirements. We find that substantially higher capital requirements (in the 20% to 30% range) would have substantially reduced the vulnerability of these financial institutions, and consequently they would have significantly reduced the need of a public bailout.
Keywords: Financial crises; Too big to fail (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cfn and nep-rmg
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