On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates

Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of New York
Staff Reports
Are banks really special? New evidence from the FDIC-induced failure of healthy banks
Adam B. Ashcraft
Abstract

The FDIC used cross-guarantees to close thirty-eight subsidiaries of First Republic Bank Corporation in 1988 and eighteen subsidiaries of First City Bancorporation in 1992 when lead banks from each of these Texas-based bank holding companies were declared insolvent. I use this exogenous failure of otherwise healthy subsidiary banks as a natural experiment for studying the impact of bank failure on local-area real economic activity. I find that the closings of the subsidiaries were associated with a significant decline in bank lending that led to a permanent reduction in real county income of about 3 percent.


Download Full text
Download Full text
Cite this item
Adam B. Ashcraft, Are banks really special? New evidence from the FDIC-induced failure of healthy banks, Federal Reserve Bank of New York, Staff Reports 176, 01 Dec 2003.
More from this series
Note: For a published version of this report, see Adam B. Ashcraft, "Are Banks Really Special? New Evidence from the FDIC-Induced Failure of Healthy Banks," American Economic Review 95, no. 5 (December 2005): 1712-30.
JEL Classification:
Subject headings:
Keywords: bank failures; cross-guarantee; uniqueness of banks
For corrections, contact Amy Farber ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal