Ditching the Middle Class with Financial Regulation
64 Pages Posted: 26 Oct 2017
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: Suggested Citation