'Banks as Safety Providers'
We propose a model of financial intermediation driven by a demand for safety. Intermediaries emerge to improve upon the self-insurance (storage) of investors. Their private provision of safety relies on carving safe claims out of risky productive investment. The agency conflict over risk choices created by intermediation is resolved with demandable debt. The option to withdraw on demand protects safety-seeking investors in risky states and achieves the first-best allocation. The model can explain the main empirical results on safe asset demand. As the supply of public debt drops, private safety provision expands and increases lending, leverage, and the scale of preventive runs (with T. Ahnert).