Did the U.S. Treasury’s capital purchase program (CPP) help bank lending and business activity?

Authors

Peter V. Egly, The University of Texas Rio Grande ValleyFollow
Andre V. Mollick, The University of Texas Rio Grande Valley

Document Type

Article

Publication Date

6-17-2012

Abstract

The 2008 financial crisis led the U.S. Treasury to implement the capital purchase program (CPP) to revive commercial bank lending and hence stimulate business activity. Employing dynamic panel techniques and methodologies from the bank lending channel literature we find that after controlling for asset size, bank capital, and macroeconomic variables (real GDP growth rate and interest rate spreads), the impact of the CPP program is statistically significant only for money center banks. However, over our sample period from 2008Q3 to 2009Q4 we find a very modest impact on lending by only the largest banks. Overall, our results suggest that CPP’s business objective to boost loan growth and hence business activity during the crisis remained unfulfilled.

Comments

Copyright © 2012, Springer Science Business Media, LLC

Recommended Citation

Egly, P.V., Mollick, A.V. Did the U.S. Treasury’s capital purchase program (CPP) help bank lending and business activity?. Rev Quant Finan Acc 40, 747–775 (2013). https://doi.org/10.1007/s11156-012-0297-9

Publication Title

Rev Quant Finan Acc

DOI

10.1007/s11156-012-0297-9