Why aren’t US banks lending?

Chicago Fed economists look at this issue in this short paper. They explore the role of banks’ exposure to commercial real estate as one of the important factors:

We find that, after controlling for other factors that might be correlated with loan growth, banks that had large exposure to the CRE market before the crisis extended loans to other sectors of the economy at a significantly slower rate during the crisis than banks that did not have such exposure. In fact, while banks with relatively small CRE exposure continued to increase their non-CRE lending during the crisis, banks with high CRE concentrations reduced their lending to sectors outside the CRE market, consistent with the notion that the CRE exposure of these banks inhibited their lending to other market segments.

Nice crisp read.

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