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

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  • Peter Egly
  • André Mollick

Abstract

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

Suggested Citation

  • Peter Egly & André Mollick, 2013. "Did the U.S. Treasury’s capital purchase program (CPP) help bank lending and business activity?," Review of Quantitative Finance and Accounting, Springer, vol. 40(4), pages 747-775, May.
    • Handle: RePEc:kap:rqfnac:v:40:y:2013:i:4:p:747-775
    DOI: 10.1007/s11156-012-0297-9
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    Cited by:

    1. Peter V. Egly & David W. Johnk & André Varella Mollick, 2018. "Bank net interest margins, the yield curve, and the 2007–2009 financial crisis," Review of Financial Economics, John Wiley & Sons, vol. 36(1), pages 12-32, January.
    2. Bolortuya Enkhtaivan & Wenling Lu, 2021. "The effect of TARP on lending: Evidence from the lead bank’s share in syndicated loans," Review of Quantitative Finance and Accounting, Springer, vol. 57(4), pages 1169-1193, November.

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    More about this item

    Keywords

    Bank lending; Capital purchase program; TARP; E44; E52;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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