Ditching the Middle Class with Financial Regulation

64 Pages Posted: 26 Oct 2017

See all articles by Francesco D'Acunto

Francesco D'Acunto

Boston College

Alberto Rossi

University of Maryland - Department of Finance

Date Written: July 25, 2017


We document that, since 2011, mortgage lenders reduced credit to middle-class households by 15% and increased credit to wealthy households by 21%. Credit to low-income households was unaffected. Results hold at the individual-loan level and zip-code level, and at the intensive margin and extensive margin. The redistribution increased monotonically with the size of the lender. The collapse of the private-label securitization market, banks’ risk-management concerns, wealth polarization, post-crisis policies of GSEs, or pre-crisis indebtment are unlikely to explain the results. The results appear consistent with large banks reacting more to the increased costs of origination imposed by financial regulation.

Suggested Citation

D'Acunto, Francesco and Rossi, Alberto, Ditching the Middle Class with Financial Regulation (July 25, 2017). Available at SSRN: https://ssrn.com/abstract=3059191 or http://dx.doi.org/10.2139/ssrn.3059191

Francesco D'Acunto

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Alberto Rossi (Contact Author)

University of Maryland - Department of Finance ( email )

Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States

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