How Did the Financial Crisis Affect Business Lending in the U.S.?
66 Pages Posted: 31 Jul 2011 Last revised: 25 Aug 2018
Date Written: January 22, 2018
We analyze changes in lending by U.S. banks to businesses during 1994-2011. We find that lending to businesses and, in particular, to small businesses, declined precipitously following onset of the financial crisis. We also examine the relative changes in business lending by banks that did, and did not, receive TARP funds from the U.S. Treasury, and find that banks receiving capital injections from the TARP failed to increase their small-business lending. Finally, we find strong and significant positive relations of both bank capital adequacy and profitability with small-business lending.
Keywords: availability of credit, bank bailout, bank credit, bank lending, bank regulation, business subsidies, capital purchase program, credit crunch, entrepreneurship, financial crisis, small business, TARP
JEL Classification: G01, G21, G28, G32, H25, H8
Suggested Citation: Suggested Citation