We provide an extensive analysis of the payout policy of U.S. banks around the financial crisis. First, while banks significantly reduce share repurchases between 2007 and 2008, they hardly reduced total dividends until 2009. Second, using established models to explain dividends, dividend payments in the crisis do not look excessive compared to banks' fundamentals in the crisis. Third, there is some heterogeneity in dividend policy; banks that do less well in the crisis reduce their dividend

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... e than banks that fare better. Fourth, the share of banks with negative earnings increases from 16 % in 2008 to 24 % in 2009; about 50 % and 90 % of these banks reduce their dividends.. Fifth, insiders of banks that increase dividends buy less stock than do insiders of banks banks that decrease dividends in 2008 and 2009, while there is no significant difference in 2006 or 2007. Overall, our evidence is consistent with the hypothesis that bank managers underestimated the severity of the crisis, and did not see a need to cut dividends.