Housing Bust, Bank Lending & Employment: Evidence from Multimarket Banks

Abstract

I use geographic variation in bank lending to study how bank real estate losses impacted the supply of credit and employment during the Great Recession. Banks exposed to distressed housing markets cut mortgage and small business lending relative to other banks in the same county. This lending contraction had real effects, as counties whose banks were exposed to adverse shocks in other markets suffered employment declines, especially in young firms. This finding is robust to instrumenting for bank exposure to housing shocks using shocks in distant markets, exposure based on historical lending, or exposure to markets with inelastic housing supply. JEL Codes: E24, E44, G21.

Employment in the Great Recession: How Important Were Household Credit Supply Shocks?

“…Most empirical work has focused on the former. Related work includes Favara and Imbs (), Mian and Sufi (), Adelino, Schoar, and Severino (), Berrospide, Black, and Keeton (), Glancy (), Anenberg et al. (), Vojtech, Kay, and Driscoll (), Gropp, Krainer, and Laderman (), Gete and Reher (), Haltenhof, Jung Lee, and Stebunovs (), Chen, Hanson, and Stein ().…”

Does mortgage lending impact business credit? Evidence from a new disaggregated bank credit data set

“…The result would again be that a rise (fall) in mortgage lending leads to more (less) business lending. For instance, Glancy (2017) reports that U.S. banks exposed to distressed housing markets cut both mortgages and small business lending relative to other banks in the same county. Zhang et al (2017) find the same for U.K. banks.…”

Institutional Investors and the U.S. Housing Recovery

“…Z i,t−1 includes all other control variables including the lagged one-period total population growth, changes in unemployment rate and foreclosure rate, growth in real median household income, as well as county and year fixed effects. 16 The variable of interests is β 1 , which captures the effect of institutional buyers on the local market.…”

“…Specifically, using HMDA 2003 to 2016 matched with the banks' income and balance sheet 16 The large number of zip codes relative to sample size precludes us from using zip code fixed effects.…”