{"title":"Regulatory uncertainty and TARP","authors":"Yupeng Lin , Xin Liu , Anand Srinivasan","doi":"10.1016/j.jfs.2024.101367","DOIUrl":null,"url":null,"abstract":"<div><div>Using the Troubled Asset Relief Program (TARP) as a laboratory, this paper examines the impacts of bank bailouts on bank-dependent clients. We find that large TARP recipient banks reduce credit supply to dependent borrowers in the post-TARP period. A large fraction of credit supply reduction is due to regulatory uncertainty on account of an increased likelihood of fines. Liquidity hoarding by TARP banks also drives part of the reduction in credit supply. Relationship borrowers experience a valuation loss around the announcements of their main banks’ TARP approvals consistent with a credit supply reduction.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101367"},"PeriodicalIF":6.1000,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Financial Stability","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1572308924001529","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
Using the Troubled Asset Relief Program (TARP) as a laboratory, this paper examines the impacts of bank bailouts on bank-dependent clients. We find that large TARP recipient banks reduce credit supply to dependent borrowers in the post-TARP period. A large fraction of credit supply reduction is due to regulatory uncertainty on account of an increased likelihood of fines. Liquidity hoarding by TARP banks also drives part of the reduction in credit supply. Relationship borrowers experience a valuation loss around the announcements of their main banks’ TARP approvals consistent with a credit supply reduction.
期刊介绍：
The Journal of Financial Stability provides an international forum for rigorous theoretical and empirical macro and micro economic and financial analysis of the causes, management, resolution and preventions of financial crises, including banking, securities market, payments and currency crises. The primary focus is on applied research that would be useful in affecting public policy with respect to financial stability. Thus, the Journal seeks to promote interaction among researchers, policy-makers and practitioners to identify potential risks to financial stability and develop means for preventing, mitigating or managing these risks both within and across countries.
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