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Bank Real Estate Lending and the New England Capital Crunch

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  • Joe Peek
  • Eric S. Rosengren

Abstract

The stock of real estate loans held by New England banks has declined dramatically. Given the limited potential for real estate investments, weak demand for real estate loans is to be expected. However, supply as well as demand factors may account for some of the decline in bank real estate loans. This paper documents that bank lending for real estate may have been constrained by a capital crunch, whereby poorly capitalized banks shrank their assets, including real estate loans, to satisfy capital requirements. Because the loss of bank capital is so widespread in New England, bank-dependent borrowers may have difficulty obtaining real estate financing. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Joe Peek & Eric S. Rosengren, 1994. "Bank Real Estate Lending and the New England Capital Crunch," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(1), pages 33-58.
  • Handle: RePEc:bla:reesec:v:22:y:1994:i:1:p:33-58
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    1. Edward J. Kane, 1985. "The Gathering Crisis in Federal Deposit Insurance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611856, January.
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