Search Results
Working Paper
Relationship Lending: That Ship Has Not Sailed for Community Banks
This study provides direct evidence of the value to banks arising from relationship lending by estimating the market premium placed on banking organizations’ small business loan portfolios. Using data from the small business loan survey contained in the June bank Call Reports, we find that small commercial and industrial (C&I) loans add value to community banks both in absolute terms and relative to the value contributed by larger C&I loans. The value‐enhancing effect of small business loans is observed primarily at small community banks, and it was present during the Great Recession as ...
Working Paper
Bank Incentives and the Effect of the Paycheck Protection Program
We assess the role of banks in the Paycheck Protection Program (PPP), a large and unprecedented small-business support program instituted as a response to the COVID-19 crisis in the United States. In 2020, the PPP administered more than $525 billion in loans and grants to small businesses through the banking system. First, we provide empirical evidence of heterogeneity in the allocation of PPP loans. Firms that were larger and less affected by the COVID-19 crisis received loans earlier, even in a within-bank analysis. Second, we develop a model of PPP allocation through banks that is ...
Working Paper
Optimal Allocation of Relief Funds: The Case of the Paycheck Protection Program
The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program that allocated $800 billion in loans and grants to small businesses following the onset of the COVID-19 crisis. This paper explores the optimal allocation of funds across firms and the distortions caused by allocating these funds through banks. We show that it can be optimal to allocate funds to the least or most affected firms depending on the underlying distribution of the shock that firms face, the firms’ financial position, and the total budget available for the program. In the model, as ...
Working Paper
Basic Facts on the Coverage of the Paycheck Protection Program
This paper applies loan-level information from Paycheck Protection Program loans to analyze the coverage of this extraordinary lending program. We show that loans went to a large share of small businesses across most industries in the US, especially to industries that were most negatively impacted by COVID-19 stay-at-home orders. We geocode the loans and then identify that 2021 loans were more concentrated in low- and moderate-income communities, along with census tracts where minority residents are a majority of the population. The growth of nonemployer loans and fintech lending in the ...
Working Paper
The Impact of the Small Business Lending Fund on Community Bank Lending to Small Businesses
Following the financial crisis, total outstanding loans to businesses by commercial banks dropped off substantially. Large loans outstanding began to rebound by the third quarter of 2010 and essentially returned to their previous growth trajectory while small loans outstanding continued to decline. Furthermore, much of the drop in small business loans outstanding was evident at community banks. To address this perceived lack of supply of credit to small businesses, the Small Business Lending Fund (SBLF) was created as part of the 2010 Small Business Jobs Act. The fund was intended to provide ...
Speech
Opening remarks at the Community Bankers’ Conference
Remarks at the Community Bankers? Conference, Federal Reserve Bank of New York, New York City.
Working Paper
Is Bigger Necessarily Better in Community Banking?
We investigate the relative performance of publicly traded community banks (those with assets less than $10 billion) versus larger banks (those with assets between $10 billion and $50 billion). A body of research has shown that community banks have potential advantages in relationship lending compared with large banks, although newer research suggests that these advantages may be shrinking. In addition, the burdens placed on community banks by the regulatory reforms mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the need to increase investment in technology, ...
Journal Article
Arkansas CDFIs Poised to Scale Small-Business Lending
Arkansas small businesses will see more lending options from CDFIs through a $10 billion federal program called the State Small Business Credit Initiative.
Working Paper
How Important Are Local Community Banks to Small Business Lending? Evidence from Mergers and Acquisitions [REVISED]
[REVISED AUG 2019]We investigate the shrinking community banking sector and the impact on local small business lending (SBL) in the context of mergers and acquisitions. From all mergers that involved community banks, we examine the varying impact on SBL depending on the local presence of the acquirers? and the targets? operations prior to acquisitions. Our results indicate that, relative to counties where the acquirer had operations before the merger, local SBL declined significantly more in counties where only the target had operations before the merger. This result holds even after ...
Report
Allocation and Employment Effect of the Paycheck Protection Program
The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program enacted as a response to the COVID-19 crisis in the United States. The PPP administered almost $800 billion in loans and grants to small businesses through the banking system. However, there is still limited consensus on its overall effect on employment. This paper explores why it is challenging to estimate the effect of the PPP. To do so, we first focus on the timing of the allocation of PPP funds across regions and firms. Counties less affected by COVID-19 and with a larger presence of ...