Article thumbnail

A "Barter" Theory of Bank Regulation and Credit Allocation.

By Anjan V Thakor and Jess Beltz

Abstract

The authors develop a model in which governmental subsidies to banks produce greater benefits for banks than they cost the taxpayers. In exchange, the government dictates private-sector credit allocation to produce political benefits that exceed the cost of subsidies. As long as banks' losses due to 'forced' credit allocation fall below the value of governmental subsidies, this represents a bilaterally efficient barter between the government and banks. However, the arrangement can also result in a 'trap,' wherein an equilibrium exists in which some banks would be better-off if no bank bartered with the government and yet no bank breaks away. Copyright 1994 by Ohio State University Press.

OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://links.jstor.org/sici?si... (external link)

  • To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.

    Suggested articles