In a general equilibrium model with risk neutral and risk averse agents, we show that if banks issue both demand deposits and equity, then free banking is run-proof and efficient. In particular, we obtain the first best insurance solution if there is adequate risk neutral capital. If sufficient risk neutral capital is unavailable, then a partial suspension of convertibility is optimal. In general, therefore, policies like capital adequacy norms and deposit insurance are neither necessary nor desirable.

In this article, we show that statements of U.S. CEOs on contentious social issues are not necessarily an expression of their political views. Republican-donor CEOs are three times more likely to make social statements with a liberal slant. CEO activism is more likely if firms’ operating environment is politically polarized and employees are Democrat-leaning. Such statements are associated with a 3% increase in consumer visits to a firm’s Democrat County stores without significantly reducing them in Republican counties. CEO activism is associated with a 0.12% gain in firm value, increased quarterly sales, and a reduced likelihood of shareholder activism on social issues.