Search Results
Working Paper
The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets
Since the Great Recession, 11 states have restricted employers? access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and ...
Journal Article
How Small Banks Deal with Large Shocks
After a natural disaster such as a hurricane, tornado, or flood, banks in the affected area experience a sharp rise in the demand for loans as property owners look to repair the damage. Recent research has focused on such events to study how small community banks adjust their typical way of doing business to respond to large shocks. The research finds that banks strategically adjust their business in three ways to meet the increased demand for capital. Two adjustments increase the funds available for lending, while one shifts lending from areas unaffected by the disaster to the affected area, ...
Working Paper
Rebuilding after Disaster Strikes: How Local Lenders Aid in the Recovery
Using detailed employment data on firm age and size, I show that the presence of local finance improves job retention and creation at young and small firms. I use natural disasters and regulatory guidance to disentangle the effects of credit supply and demand. I find that an additional standard deviation of local finance offsets the negative effects of the disaster and can lead to 1 to 2% higher employment growth at either young or small firms. Banks increase lending but are not borrowing against future lending, nor do they experience changes in default rates. These findings suggest that ...
Working Paper
Clouded Judgment: The Role of Sentiment in Credit Origination
Using daily fluctuations in local sunshine as an instrument for sentiment, we study its effect on day-today decisions of lower-level financial officers. Positive sentiment is associated with higher credit approvals, and negative sentiment has the opposite effect of a larger magnitude. These effects are stronger when financial decisions require more discretion, when reviews are less automated, and when capital constraints are less binding. The variation in approval rates affects ex-post financial performance and produces significant real effects. Our analysis of the economic channels suggests ...
Working Paper
Tracing Out Capital Flows: How Financially Integrated Banks Respond to Natural Disasters
Multimarket banks reallocate capital when local credit demand increases after natural disasters. Using property damage as an instrument for lending growth, we find credit in unaffected but connected markets declines by a little less than 50 cents per dollar of additional lending in shocked areas. However, banks shield their core markets because most of the decline comes from loans in areas where banks do not own branches. Moreover, banks increase sales of more-liquid loans and they bid up the prices of deposits in the connected markets. These actions help lessen the impact of the demand shock ...
Working Paper
The Unintended Consequences of Employer Credit Check Bans for Labor Markets
Over the last 15 years, 11 states have restricted employers’ access to the credit reports of job applicants. We estimate that county-level job vacancies have fallen by 5.5 percent in occupations affected by these laws relative to exempt occupations in the same counties and national-level vacancies for the same occupations. Cross-sectional heterogeneity suggests that employers use credit reports as signals of a worker’s ability to perform the job: vacancies fall more in counties with a large share of subprime residents, while they fall less for occupations with other commonly available ...
Working Paper
The Unintended Consequences of Employer Credit Check Bans for Labor Markets
Over the last decade, 11 states have restricted employers? access to the credit reports of job applicants. We document a significant decline in county-level vacancies after these laws were enacted: Job postings fall by 5.5 percent in affected occupations relative to exempt occupations in the same county and the same occupation nationwide. Cross-sectional heterogeneity in the estimated effects suggests that employers use credit reports as signals: Vacancies fall more in counties with a large share of subprime residents, while they fall less in occupations with other commonly available signals.
Working Paper
The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets
Since the Great Recession, 11 states have restricted employers' access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and ...
Working Paper
Did local lenders forecast the bust? Evidence from the real estate market
This paper shows that mortgage lenders with a physical branch near the property being financed have better information about home-price fundamentals than nonlocal lenders. During the real estate run-up from 2002-06, home price growth negatively correlates with the share of loans made by local lenders, namely lenders with a branch in the respective county. Moreover, home prices fell less from 2006-09 in areas where more of the loans were made by local lenders. California foreclosure rates during the crisis are negatively correlated with local lending during the run-up. A 1 standard deviation ...
Journal Article
Does the CDFI Fund Help Low-Income Borrowers?
The Treasury Department's CDFI Fund awards grants to community development financial institutions (CDFIs) that operate in low-income areas. Awards are intended to strengthen the institutions and increase the amount they lend to borrowers in those areas. This analysis of proprietary data from the US Treasury shows that when CDFIs receive grant money, they put it to use as additional loans in impoverished and economically weak areas.