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Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates

Author

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  • Elena Loutskina
  • Philip E. Strahan

Abstract

This paper shows that securitization reduces the influence of bank financial condition on loan supply. Low-cost funding and increased balance-sheet liquidity raise bank willingness to approve mortgages that are hard to sell (jumbo mortgages), while having no effect on their willingness to approve mortgages easy to sell (non-jumbos). Thus, the increasing depth of the mortgage secondary market fostered by securitization has reduced the impact of local funding shocks on credit supply. By extension, securitization has weakened the link from bank funding conditions to credit supply in aggregate, thereby mitigating the real effects of monetary policy.

Suggested Citation

  • Elena Loutskina & Philip E. Strahan, 2006. "Securitization and the Declining Impact of Bank Finance on Loan Supply: Evidence from Mortgage Acceptance Rates," NBER Working Papers 11983, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11983
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    Cited by:

    1. Evan Gatev & Philip Strahan, 2008. "Liquidity Risk and Syndicate Structure," NBER Working Papers 13802, National Bureau of Economic Research, Inc.
    2. Schaeck, K. & Silva Buston, C.F. & Wagner, W.B., 2013. "The Two Faces of Interbank Correlation," Discussion Paper 2013-077, Tilburg University, Center for Economic Research.
    3. Trujillo Ponce, Antonio & Samaniego Medina, Reyes & Cardone Riportella, Clara, 2009. "What do we know about banks securitisation? the spanish experience," DEE - Working Papers. Business Economics. WB wb093904, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    4. Apergis, Nicholas & Christou, Christina, 2015. "The behaviour of the bank lending channel when interest rates approach the zero lower bound: Evidence from quantile regressions," Economic Modelling, Elsevier, vol. 49(C), pages 296-307.
    5. Altunbas, Yener & Gambacorta, Leonardo & Marques-Ibanez, David, 2010. "Bank risk and monetary policy," Journal of Financial Stability, Elsevier, vol. 6(3), pages 121-129, September.
    6. Domenico Giannone & Michele Lenza & Lucrezia Reichlin, 2010. "Business Cycles in the Euro Area," NBER Chapters,in: Europe and the Euro, pages 141-167 National Bureau of Economic Research, Inc.
    7. Silva Buston, C.F., 2013. "Active Risk Management and Banking Stability," Discussion Paper 2013-068, Tilburg University, Center for Economic Research.
    8. Omneya Abdelsalam & Marwa Elnahass & Sabur Mollah, 2018. "Asset Securitization and Risk: Does Bank Type Matter?," Working Papers 2018-15, Swansea University, School of Management.
    9. Sherrill Shaffer & Lorein Thomas, 2007. "A reassessment of market power among credit card banks," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 755-767.
    10. Silva Buston, Consuelo, 2016. "Active risk management and banking stability," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 203-215.
    11. Hänsel, Dennis N. & Bannier, Christina E., 2008. "Determinants of European banks' engagement in loan securitization," Discussion Paper Series 2: Banking and Financial Studies 2008,10, Deutsche Bundesbank.
    12. Norden, Lars & Silva Buston, Consuelo & Wagner, Wolf, 2014. "Financial innovation and bank behavior: Evidence from credit markets," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 130-145.
    13. repec:pri:cepsud:141rosen is not listed on IDEAS
    14. Leonardo Gambacorta & Paolo Emilio Mistrulli, 2014. "Bank Heterogeneity and Interest Rate Setting: What Lessons Have We Learned since Lehman Brothers?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(4), pages 753-778, June.
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    17. Jose M. Berrospide & Rochelle M. Edge, 2010. "The effects of bank capital on lending: What do we know, and what does it mean?," CAMA Working Papers 2010-26, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    18. Masami Imai, 2008. "Crowding-Out Effects of a Government-Owned Depository Institution: Evidence from a Natural Experiment in Japan," Wesleyan Economics Working Papers 2008-003, Wesleyan University, Department of Economics.
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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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