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Government Support of Banks and Bank Lending

Author

Listed:
  • William Bassett

    () (Board of Governors of the Federal Reserve System)

  • Selva Demiralp

    () (Koc University)

  • Nathan Lloyd

    () (Board of Governors of the Federal Reserve System)

Abstract

The extraordinary steps taken by governments during the 2007-2009 financial crisis to prevent the failure of large financial institutions and support credit availability have invited heated debate. This paper comprehensively reviews empirical assessments of the benefits of those programs—such as their effectiveness in reducing bank failures or supporting new lending—introduces a combined dataset of five key programs that provided term debt or equity to banks in the U.S., and assesses the effects of such support on lending by U.S. banks. The results, using an instrumental variable approach, suggest that bank loans did not increase at institutions receiving government support.

Suggested Citation

  • William Bassett & Selva Demiralp & Nathan Lloyd, 2016. "Government Support of Banks and Bank Lending," Koç University-TUSIAD Economic Research Forum Working Papers 1611, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1611
    as

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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1611.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Bank Loans; TAF; TARP; Capital Purchase Program.;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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