This paper analyzes how the leverage of financial institutions affects their demand for
assets and the resulting value of transactions between financial institutions. The results
show a positive relationship between buyer capital and the likelihood of buying assets,
and between buyer capital and the value of the deal. That is, those institutions that are
the least constrained in their ability to raise funding are those that demand assets and
pay more for them. This result does not hold, however, for deposit-taking institutions
that had access to several government programs designed to improve their liquidity
position during the crisis of 2008.