Journal Article

Six causes of the credit crunch

Abstract: Bank lending typically moves with the business cycle. In Texas from 1987 to 1992, however, bank loans declined while nonagricultural employment rose. Robert T. Clair and Paula Tucker consider this evidence of a constrained supply of bank loans, or credit crunch. ; Clair and Tucker find that multiple factors have reduced banks' willingness and ability to supply loans. The resolution of failed banks and thrifts, tightening of bank examination standards, new capital requirements, new regulations and increased enforcement of old regulations, and increased exposure to lawsuits have each had an effect. Many of these regulatory changes where made to address important economic and social goals, but their side effects, often unintended and perhaps unavoidable, have been to reduce bank lending in the short run.

Keywords: Credit;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1993

Issue: Sep

Pages: 1-19