Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60604
Authors: 
Ashcraft, Adam B.
Year of Publication: 
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

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