Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189864 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
Staff Report No. 823
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
During banking crises, regulators often relax their normal requirements and refrain from closing financially troubled banks. I estimate the real effects of such regulatory forbearance by comparing differences in state-level economic outcomes by the amount of forbearance extended during the U.S. savings and loan crisis. To instrument for forbearance, I use historical variation in deposit insurance - and hence supervision - of similar financial intermediaries (thrifts) and exploit fixed differences between regional supervisors of the same regulator. The evidence suggests a policyinduced increase in high-risk loans during the official forbearance period (1982-89), followed by a broader bust in house prices and real GDP.
Subjects: 
financial crises
regulatory policy
JEL: 
G01
G2
H12
Document Type: 
Working Paper

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