volume 27, issue 3, P498-516 2011
DOI: 10.1093/oxrep/grr020
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Abstract: The financial crisis of 2007-9 resulted in state intervention in financial markets around the world, and the state became a major shareholder in many banks. While state bailouts were politically sensitive, policy-makers had little alternative but to supply funds to financial institutions that were viewed as 'too big to fail', or TBTF. In this paper, I review the history of, and the rationale for, the TBTF policy. I argue that, from a policy perspective, the most important costs of the TBTF problem are incurred…

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