Bank Loan Supply Responses to Federal Reserve Emergency Liquidity Facilities

54 Pages Posted: 28 Apr 2014 Last revised: 14 Mar 2017

Allen N. Berger

University of South Carolina - Darla Moore School of Business; Wharton Financial Institutions Center; European Banking Center

Lamont K. Black

DePaul University - Driehaus College of Business; Center for Financial Services

Christa H. S. Bouwman

Texas A&M University; Wharton Financial Institutions Center

Jennifer Dlugosz

Washington University in St. Louis - John M. Olin Business School

Date Written: March 13, 2017

Abstract

The Federal Reserve injected unprecedented liquidity into banks during the recent crisis through the discount window and Term Auction Facility. We examine the use and effectiveness of these facilities. We find that recipient banks increased their lending overall, both short- and long-term, and in most loan categories. The facilities resulted in enhanced lending at expanding banks and reduced declines at contracting banks. Small banks increased small business lending and large banks increased large business lending. There were no significant changes in loan quality or loan contract terms by either large or small banks.

Keywords: Banks, Discount Window, Term Auction Facility, Central Bank, Lending

JEL Classification: G21, G28, E58

Suggested Citation

Berger, Allen N. and Black, Lamont K. and Bouwman, Christa H. S. and Dlugosz, Jennifer, Bank Loan Supply Responses to Federal Reserve Emergency Liquidity Facilities (March 13, 2017). Available at SSRN: https://ssrn.com/abstract=2429710 or http://dx.doi.org/10.2139/ssrn.2429710

Allen N. Berger

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Wharton Financial Institutions Center

Philadelphia, PA 19104-6367
United States

European Banking Center

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Lamont K. Black

DePaul University - Driehaus College of Business ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States
312-362-5617 (Phone)
312-362-6566 (Fax)

HOME PAGE: http://driehaus.depaul.edu/faculty-and-staff/faculty/Pages/black-lamont.aspx

Center for Financial Services

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

HOME PAGE: http://driehaus.depaul.edu/about/centers-and-institutes/center-for-financial-services/Pages/default.

Christa H. S. Bouwman (Contact Author)

Texas A&M University ( email )

360H Wehner
College Station, TX 77843-4218
United States
979-845-3514 (Phone)
979-845-3514 (Fax)

HOME PAGE: http://people.tamu.edu/~cbouwman/

Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

Jennifer Dlugosz

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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