34  For example, Saito, Suzuki, and Yamada (2010) show that markets are able to create collateral assets (relatively safe bonds) in a crisis endogenously by using a model in which a country-specific catastrophic shock was shared between two countries in the presence of solvency constraints.
Similarly, prudential supervision of financial institutions may be thought of as primarily valuable for crisis prevention -- useful for ensuring that financial institutions are adequately capitalized, don’t take unacceptable risks with other people’s money, and that the weak ones are required to shape up or go under.