Does going easy on distressed banks help economic growth?

Arbeitspapier

During banking crises, regulators often relax their normal requirements and refrain from closing financially troubled banks. I estimate the real effects of such regulatory forbearance by comparing differences in state-level economic outcomes by the amount of forbearance extended during the U.S. savings and loan crisis. To instrument for forbearance, I use historical variation in deposit insurance - and hence supervision - of similar financial intermediaries (thrifts) and exploit fixed differences between regional supervisors of the same regulator. The evidence suggests a policyinduced increase in high-risk loans during the official forbearance period (1982-89), followed by a broader bust in house prices and real GDP.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 823

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Crisis Management
• Subject: financial crises ; regulatory policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hundtofte, Sean
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/189864
• Last update: 10.03.2025, 11:43 AM CET