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The Cross‐Market Spillover of Economic Shocks through Multimarket Banks
Author(s) -
BERROSPIDE JOSE M.,
BLACK LAMONT K.,
KEETON WILLIAM R.
Publication year - 2016
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12323
Subject(s) - securitization , spillover effect , portfolio , monetary economics , metropolitan area , business , financial system , economics , finance , macroeconomics , medicine , pathology
This study investigates the mortgage lending of banks operating in multiple U.S. metropolitan areas during the housing market collapse of 2007–09. We show that multimarket banks reduced local portfolio lending in response to high overall mortgage delinquencies in their other markets, consistent with the view that local economic shocks can be transmitted to other regions through banks’ internal capital markets. This spillover was greatest when the bank lacked a branch presence and when the market was highly peripheral to the bank in terms of its total mortgage lending. These effects were not fully offset by securitization or other portfolio lenders.