Conference Paper
Firewalls in universal banks
Rajan, Raghuram G.; Kroszner, Randall S. (1995)
Proceedings , Paper 479

Conference Paper
Moral hazard under commercial and universal banking
Boyd, John H.; Smith, Bruce D.; Chang, Chun (1998-08)
Proceedings , Issue Aug , Pages 426-471

Working Paper
Moral hazard under commercial and universal banking
Boyd, John H.; Smith, Bruce D.; Chang, Chun (1998)
Many claims have been made about the potential benefits, and the potential costs, of adopting a system of universal banking in the United States. We evaluate these claims using a model where there is a moral hazard problem between banks and ?borrowers,? a moral hazard problem between banks and a deposit insurer, and a costly state verification problem. Under conditions we describe, allowing banks to take equity positions in firms strengthens their ability to extract surplus, and exacerbates problems of moral hazard. The incentives of universal banks to take equity positions will often be ...
Working Papers , Paper 585