Theses and Dissertations - UTB/UTPA
The Impact of Securitization, Bank Liquidity Shocks, and Government Intervention on Lending and Banks' Asset Composition: Evidence from The U.S. 2007-2009 Financial Crisis
Date of Award
Doctor of Philosophy (PhD)
Dr. Andre Varella Mollick
Dr. Diego Escobari
Dr. Dave Jackson
The 2007- 2009 financial crisis creates a new wave of research opportunities in part due to the transformation of the banking system that led to the development of securitized banking that is supported by short term funding sources provided through the money and capital markets. The near collapse of the financial system ultimately led to the ensuing government intervention by the Federal Reserve and the U.S. Treasury department to revive the frail U.S. economy. This dissertation has two basic research objectives: 1) investigate the impact of securitization and the subprime mortgage collapse on bank lending during the crisis and 2) examine changes in banks’ balance sheet composition associated with government intervention. Results suggest that traditional bank funding costs play a diminished role in the supply of bank lending in the larger bank samples (large banks and money center banks) and yet there is a positive impact of the repurchase agreement (REPO) market rates on bank lending that is pervasive in the smaller bank samples (small and medium) suggesting that increases in Repo rates fosters lending during the crisis period. Real estate lending exposure negatively affects bank lending in the small and medium bank samples. The evidence suggests that the Federal Reserves initial round of quantitative easing served as an important channel through which banks were able to attain liquidity objectives during the crisis. The results suggest that small and money center banks with greater loan portfolio exposures choose to build liquidity in response to a rise in Repo rates compared to banks with lower lending exposures. Finally, the balance sheet composition for banks in general has shifted towards more liquid based banks in the post crisis period and residential real estate portfolios has reverted to pre-crisis levels for money center banks and has remained mostly consistent throughout the sample period for all other banks with a modest rise noted in the post crisis period for large banks.
University of Texas-Pan American
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