Thorsten Beck, Mathias Dewatripont, Xavier Freixas, Paul Seabright, Diane Coyle, 18 February 2010

Billions have been spent saving European banks. Should these bailouts be subject to the usual competition rules or should stability be allowed to trump ‘business as usual’? This column introduces a new CEPR report “Bailing out the Banks: Reconciling Stability and Competition” that argues for a more subtle reaction. Competition policy is critical even in crises but the rules applied must recognise the special features that mark a crisis-struck banking sector.

Mariassunta Giannetti, Andrei Simonov, 23 September 2009

Is there any evidence that bank bailouts will improve the real economy? This column uses micro-level evidence from the Japanese banking crisis to assess bank recapitalisation efforts. It says that bailouts do increase lending, but banks continue to lend to low-quality borrowers, and borrowers may hold the cash on their balance sheets rather than investing or hiring.

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