Unexpected Effects of Bank Bailouts: Depositors Need Not Apply and Need Not Run

A key policy issue is whether bank bailouts weaken or strengthen market discipline. We address this by analyzing how influence deposit quantities and prices of recipients versus other banks. Using TARP bailouts, we find both decline, consistent with substantially reduced demand for deposits bailed-out banks that dominate discipline supply effects. Main findings are robust to numerous checks endogeneity tests. However, a deeper dive into depositor heterogeneity suggests nuance. Increases in uninsured deposits, transactions repaid bailout funds early suggest some limited support weakened