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Six causes of the credit crunch

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  • Robert T. Clair
  • Paula Tucker
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    Abstract

    Bank lending typically moves with the business cycle. In Texas from 1987 to 1992, however, bank loans declined while nonagricultural employment rose. Robert T. Clair and Paula Tucker consider this evidence of a constrained supply of bank loans, or credit crunch. ; Clair and Tucker find that multiple factors have reduced banks' willingness and ability to supply loans. The resolution of failed banks and thrifts, tightening of bank examination standards, new capital requirements, new regulations and increased enforcement of old regulations, and increased exposure to lawsuits have each had an effect. Many of these regulatory changes where made to address important economic and social goals, but their side effects, often unintended and perhaps unavoidable, have been to reduce bank lending in the short run.

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    File URL: http://www.dallasfed.org/assets/documents/research/er/1993/er9303a.pdf
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    Bibliographic Info

    Article provided by Federal Reserve Bank of Dallas in its journal Economic and Financial Policy Review.

    Volume (Year): (1993)
    Issue (Month): Sep ()
    Pages: 1-19

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    Handle: RePEc:fip:fedder:y:1993:i:sep:p:1-19

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    Related research

    Keywords: Credit;

    References

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    1. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 679-692, June.
    2. Gregory E. Elliehausen & John D. Wolken, 1990. "Banking markets and the use of financial services by small and medium- sized businesses," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 801-817.
    3. Frederick T. Furlong, 1992. "Capital regulation and bank lending," Economic Review, Federal Reserve Bank of San Francisco, pages 23-33.
    4. Diana Hancock & James A. Wilcox, 1992. "The effect on bank assets of business conditions and capital shortfalls," Proceedings 373, Federal Reserve Bank of Chicago.
    5. Raymond E. Owens & Stacey L. Schreft, 1993. "Identifying credit crunches," Working Paper 93-02, Federal Reserve Bank of Richmond.
    6. D'Ann M. Petersen, 1992. "Will office real estate in Texas ever recover?," Southwest Economy, Federal Reserve Bank of Dallas, issue Sep, pages 6-8.
    7. Richard F. Syron, 1991. "Are we experiencing a credit crunch?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 3-10.
    8. William C. Gruben & Jonathan A. Neuberger & Ronald H. Schmidt, 1990. "Imperfect information and the Community Reinvestment Act," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 27-46.
    9. Katherine A. Samolyk, 1991. "A regional perspective on the credit view," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 27-38.
    10. Jerry L. Jordan, 1992. "The credit crunch: a monetarist's perspective," Proceedings 370, Federal Reserve Bank of Chicago.
    11. Christine Pavel & Harvey Rosenblum, 1985. "Bank and nonbanks: The horse race continues," Economic Perspectives, Federal Reserve Bank of Chicago, issue May, pages 3-17.
    12. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    Cited by:
    1. Stephen D. Prowse, 1997. "The economics of private placements : middle-market corporate finance, life insurance companies, and a credit crunch," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 12-24.
    2. Del Giovane, Paolo & Eramo, Ginette & Nobili, Andrea, 2011. "Disentangling demand and supply in credit developments: A survey-based analysis for Italy," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2719-2732, October.

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