01921cas a2200241 a 4500 AALejournalIMF006119 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451873801 1018-5941 BD-DhAAL BD-DhAAL Georgiou, Andreas. Excessive Lending, Leverage, and Risk-Taking in the Presence of Bailout Expectations / Andreas Georgiou. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (25 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The financial crisis that began in 2007 has brought to the fore the issues of excesses in lending, leverage, and risk-taking as some of the fundamental causes of this crisis. At the same time, in dealing with the financial crisis there have been large scale interventions by governments, often referred to as bailouts of the lenders. This paper presents a framework where rational economic agents engage in ex ante excessive lending, borrowing, and risk-taking if creditors assign a positive probability to being bailed out. The paper also offers some thoughts on policy implications. It argues that it would be most productive for the long run if lending institutions were not bailed out. If the continuing existence of an institution was deemed essential, assistance should take the form of capital injections that dilute the equity of existing owners. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2009/233 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/233/001.2009.issue-233-en.xml IMF e-Library