Did Saving Wall Street Really Save Main Street? The Real Effects of TARP on Local Economic Conditions

77 Pages Posted: 27 May 2014 Last revised: 9 Feb 2016

See all articles by Allen N. Berger

Allen N. Berger

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

Raluca A. Roman

Federal Reserve Bank of Philadelphia

Date Written: January 29, 2016

Abstract

We investigate whether saving Wall Street through the Troubled Assets Relief Program (TARP) really saved Main Street during the recent financial crisis. Our difference-in-difference analysis suggests that TARP statistically and economically significantly increased net job creation and net hiring establishments and decreased business and personal bankruptcies. The results are robust, including accounting for endogeneity. The main mechanisms driving the results appear to be increases in commercial real estate lending and off-balance sheet real estate guarantees. These results suggest that saving Wall Street via TARP may have helped save Main Street, complementing the TARP literature and contributing to the cost-benefit debate.

Keywords: TARP, Banks, Capital Support, Economic Conditions

JEL Classification: G18, G21, G28

Suggested Citation

Berger, Allen N. and Roman, Raluca A., Did Saving Wall Street Really Save Main Street? The Real Effects of TARP on Local Economic Conditions (January 29, 2016). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2442070 or http://dx.doi.org/10.2139/ssrn.2442070

Allen N. Berger (Contact Author)

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

Raluca A. Roman

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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