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Title:Are banks really special? New evidence from the FDIC-induced failure of healthy banks PDF Logo
Authors:Ashcraft, Adam B.
Issue Date:2003
Series/Report no.:Staff Report, Federal Reserve Bank of New York 176
Abstract:The FDIC used cross-guarantees to close thirty-eight subsidiaries of First RepublicBank 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.
Subjects:bank failures, cross-guarantee, uniqueness of banks
JEL:E5
G18
G33
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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