IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/34277.html
   My bibliography  Save this paper

Interest Rate Caps and Bank Loan Supply: Locking out the Small Borrower in the Great Depression

Author

Listed:
  • Haelim Anderson
  • Matthew S. Jaremski

Abstract

We examine the effects of changes in an interest rate cap on small loan brokers in New Jersey during the Great Depression. Using newly constructed data on brokers and banks, we find that small loans declined sharply when the cap was lowered, and despite worsening economic conditions, they rebounded when the cap was raised back up. Consumers could not obtain alternative credit from banks, effectively shutting them out of the market. The cap had a permanent impact on the small loan market due to the large number of broker closures, thereby further reducing the availability of small loans and increasing market concentration. Our findings highlight the fundamental trade-off faced by policymakers: strict rate caps may protect borrowers from predatory lending but can eliminate necessary credit options for vulnerable populations.

Suggested Citation

  • Haelim Anderson & Matthew S. Jaremski, 2025. "Interest Rate Caps and Bank Loan Supply: Locking out the Small Borrower in the Great Depression," NBER Working Papers 34277, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34277
    Note: DAE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w34277.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:34277. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.