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Did the U.S. Treasury’s capital purchase program (CPP) help bank lending and business activity?

  • Peter Egly

    ()

  • André Mollick

    ()

The 2008 financial crisis led the U.S. Treasury to implement the capital purchase program (CPP) to revive commercial bank lending and hence stimulate business activity. Employing dynamic panel techniques and methodologies from the bank lending channel literature we find that after controlling for asset size, bank capital, and macroeconomic variables (real GDP growth rate and interest rate spreads), the impact of the CPP program is statistically significant only for money center banks. However, over our sample period from 2008Q3 to 2009Q4 we find a very modest impact on lending by only the largest banks. Overall, our results suggest that CPP’s business objective to boost loan growth and hence business activity during the crisis remained unfulfilled. Copyright Springer Science+Business Media, LLC 2013

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File URL: http://hdl.handle.net/10.1007/s11156-012-0297-9
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Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 40 (2013)
Issue (Month): 4 (May)
Pages: 747-775

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Handle: RePEc:kap:rqfnac:v:40:y:2013:i:4:p:747-775
Contact details of provider: Web page: http://springerlink.metapress.com/link.asp?id=102990

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  1. Allen N. Berger & Gregory F. Udell, 2003. "The institutional memory hypothesis and the procyclicality of bank lending behavior," Finance and Economics Discussion Series 2003-02, Board of Governors of the Federal Reserve System (U.S.).
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  11. Loutskina, Elena, 2011. "The role of securitization in bank liquidity and funding management," Journal of Financial Economics, Elsevier, vol. 100(3), pages 663-684, June.
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