The impact of government intervention on the stabilization of domestic financial markets and on U.S. banks’ asset composition

Authors

Peter V. Egly, The University of Texas Rio Grande ValleyFollow
Diego Escobari, The University of Texas Rio Grande ValleyFollow
David W. Johnk

Document Type

Article

Publication Date

2016

Abstract

The 2007–2009 financial crisis that evolved from various factors including the housing boom, aggressive lending activity, financial innovation, and increased access to money and capital markets prompted unprecedented U.S. government intervention in the financial sector. We examine changes in banks’ balance sheet composition associated with U.S. government intervention during the crisis. We find that the initial round of quantitative easing positively impacts bank liquidity across all bank samples. Our results show a positive impact of repurchase agreement market rates on bank liquidity for small and medium banks. We conclude that banks have become more liquid in the post-crisis period, especially the larger banks (large and money center banks). We show that real estate loan portfolio exposures have reverted to pre-crisis levels for money center banks and remained flat for all other bank samples.

Comments

© 2015, Springer Science Business Media New York. Original published version available at https://doi.org/10.1007/s12197-015-9320-z

Recommended Citation

Egly, P.V., Escobari, D. & Johnk, D.W. The impact of government intervention on the stabilization of domestic financial markets and on U.S. banks’ asset composition. J Econ Finan 40, 683–713 (2016). https://doi.org/10.1007/s12197-015-9320-z

Publication Title

Journal of Economics and Finance

DOI

10.1007/s12197-015-9320-z