Government Support of Banks and Bank Lending

49 Pages Posted: 22 Aug 2014 Last revised: 6 Oct 2016

See all articles by William F. Bassett

William F. Bassett

Board of Governors of the Federal Reserve System (FRB)

Selva Demiralp

Koc University - Department of Economics

Nathan Lloyd

Zions Bancorporation

Date Written: September 30, 2016

Abstract

The extraordinary steps taken by governments during the 2007-2009 financial crisis to prevent the failure of large financial institutions and support credit availability have invited heated debate. This paper comprehensively reviews empirical assessments of the benefits of those programs — such as their effectiveness in reducing bank failures or supporting new lending — introduces a combined dataset of five key programs that provided term debt or equity to banks in the U.S., and assesses the effects of such support on lending by U.S. banks. The results, using an instrumental variable approach, suggest that bank loans did not increase at institutions receiving government support.

Keywords: Bank Loans, TAF, TARP, Capital Purchase Program

JEL Classification: G11, G21, E58

Suggested Citation

Bassett, William F. and Demiralp, Selva and Lloyd, Nathan, Government Support of Banks and Bank Lending (September 30, 2016). Available at SSRN: https://ssrn.com/abstract=2483966 or http://dx.doi.org/10.2139/ssrn.2483966

William F. Bassett (Contact Author)

Board of Governors of the Federal Reserve System (FRB) ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Selva Demiralp

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910 Istanbul
Turkey
+212 338 1842 (Phone)

Nathan Lloyd

Zions Bancorporation ( email )

1 South Main Street, #15
Salt Lake City, UT 84133
United States

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