Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154237
Authors: 
Koetter, Michael
Noth, Felix
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper 1804
Abstract: 
This study investigates if the Troubled Asset Relief Program (TARP) distorted price competition in U.S. banking. Political indicators reveal bailout expectations after 2009, manifested as beliefs about the predicted probability of receiving equity support relative to failing during the TARP disbursement period. In addition, the TARP affected the competitive conduct of unsupported banks after the program stopped in the fourth quarter of 2009. The risk premium required by depositors was lower, and loan rates were higher for banks with higher bailout expectations. The interest margins of unsupported banks increased in the immediate aftermath of the TARP disbursement but not after 2010. These effects are economically very small though. No effects emerged for loan or deposit growth, which suggests that protected banks did not increase their market shares at the expense of less protected banks.
Subjects: 
bailout expectations
Banking
competition
TARP
JEL: 
C30
C78
G21
G28
L51
ISBN: 
978-92-899-1617-2
Document Type: 
Working Paper

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