U.S. Bank Behavior in the Wake of the 2007-2009 Financial Crisis
AbstractThe paper examines the slowdown of lending by large U.S. banks over the period 2007Q3 - 2009Q2, focusing on: (i) whether capital or liquidity was the binding constraint; (ii) factors influencing banksâ€™ decision to hold capital; and (iii) their pricing behavior. Using quarterly data for the largest U.S. banks, the paper finds that capital, rather than liquidity, constrained lending. Banks took actions to increase capital by slowing lending and raising profit margins, not fully passing through the Federal Reserveâ€™s interest rate cuts. Banks optimally choose capital based on the expected future demand for loans and the marginal cost of capital.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 10/131.
Date of creation: 01 May 2010
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-BAN-2010-07-17 (Banking)
- NEP-BEC-2010-07-17 (Business Economics)
- NEP-CBA-2010-07-17 (Central Banking)
- NEP-FMK-2010-07-17 (Financial Markets)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Asani Sarkar, 2009. "Liquidity risk, credit risk, and the Federal Reserve's responses to the crisis," Staff Reports 389, Federal Reserve Bank of New York.
- Todd Keister & James J. McAndrews, 2009.
"Why are banks holding so many excess reserves?,"
Current Issues in Economics and Finance,
Federal Reserve Bank of New York, vol. 15(Dec).
- Thomas F. Cosimano & Dalia Hakura, 2011. "Bank Behavior in Response to Basel Iii," IMF Working Papers 11/119, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.