The Decline of Big-Bank Lending to Small Business: Dynamic Impacts on Local Credit and Labor Markets
Small business lending by the four largest banks fell sharply relative to others in 2008 and remained depressed through 2014. We explore the dynamic adjustment process following this credit supply shock. In counties where the largest banks had a high market share, the aggregate flow of small business credit fell, interest rates rose, fewer businesses expanded, unemployment rose, and wages fell from 2006 to 2010. While the flow of credit recovered after 2010 as other lenders slowly filled the void, interest rates remain elevated. Although unemployment returns to normal by 2014, the effect on wages persists in these areas.
We are especially grateful to Bill Phelan, Mark Zoff and others at PayNet Inc. for helpful comments and for providing access to data. We thank Jack Brand, Peter Carroll, Victoria Ivashina, James Kirby, Karen Mills, Larry Nath, Raghuram Rajan, Rick Ruback, Peter Sands, David Scharfstein, Til Schuermann, Adi Sunderam, Chuck Withee, Royce Yudkoff, and seminar participants at BYU, Duke, Harvard, the NBER Summer Institute, and NYU for helpful comments. Hanson gratefully acknowledges funding from the Harvard Business School Division of Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Brian S. Chen
I am employed as a part-time contractor for PayNet, Inc. which provided proprietary data used for some of the analysis in this article. However, the extent of the financial support paid by PayNet was significantly less than $5,000 as of the previous twelve months. In addition, PayNet did not have the right to review the paper prior to its circulation.Samuel G. Hanson
August 11, 2017
SAMUEL G. HANSON
Outside Activities since 2011
This document contains a list of professional activities beyond my main employment at Harvard
University. Please feel free to contact me with any questions about this disclosure statement.
Academic consultant to former Treasury Secretary Timothy Geithner on his book about
the financial crisis, Stress Test: Reflections on Financial Crises: 2013–2014.
Academic Consultant for The D. E. Shaw Group: 2014.
Academic Consultant for Bracebridge Capital: 2015–present.
Academic Consultant for the Federal Reserve Bank of Minneapolis: 2016.
I was paid by The Clearing House Association in 2010 for the unpublished working
paper, “An Analysis of the Impact of ‘Substantially Heightened’ Capital Requirements on
Large Financial Institutions”.
Paid honoraria for papers:
The Brookings Institution will pay me an honorarium for the paper “Strengthening and
Streamlining Bank Capital Regulation” in 2017.
The Federal Reserve Bank of Kansas City paid me an honorarium for the paper “The
Federal Reserve's Balance Sheet as a Financial-Stability Tool” in 2016.
The International Monetary Fund paid me an honorarium for the paper “An Evaluation of
Money Market Fund Reform Proposals” in 2015.
The Banco Central de Chile paid me an honorarium for the paper “Forward Guidance in
the Yield Curve: Short Rates versus Bond Supply” in 2015.
The Brookings Institution paid me an honorarium for the working paper “Government
Debt Management at the Zero Lower Bound” in 2014.
HBS Investment Management Workshop, 2015-present.
Speaker at Morgan Stanley Conference on Fixed Income Trading and Portfolio
As part of my work at Harvard Business School, I regularly write cases about hedge
funds, investment managers, and their strategies. I receive no compensation from these
managers for writing these cases, and the cases are not meant as endorsements of the
managers or their strategies.
My research is and has been historically fully funded by the Division of Research at the
Harvard Business School.Jeremy C. Stein
Jeremy C. Stein
Outside (Non-Harvard) Activities Since 2006
A. Compensated Activities*
I have given paid talks for a number of financial firms, investor groups, academic institutions, and central banks.
Key Square Capital Management: consultant, July 2016-present.
BlueMountain Capital Management: consultant, 2015.
Guggenheim Partners: consultant, 2005-2007.
The Clearing House Association: “An Analysis of the Impact of ‘Substantially Heightened’ Capital Requirements on Large Financial Institutions,” unpublished paper with Anil Kashyap and Samuel Hanson, 2010.
Honoraria for Papers
Federal Reserve Bank of Kansas City, for “Rethinking Capital Regulation,” with Anil Kashyap and Raghuram Rajan, 2008.
Federal Reserve Bank of Kansas City, for “The Federal Reserve’s Balance Sheet as a Financial Stability Tool,” with Robin Greenwood and Sam Hanson, 2016.
Brookings Institution, for “Strengthening and Streamlining Bank Capital Regulation,” with Robin Greenwood, Sam Hanson and Adi Sunderam, 2017.
Federal Reserve Board: Governor, May 2012-May 2014.
U.S. Treasury Department: Senior Advisor to the Secretary; and concurrently, staff of National Economic Council, February-July 2009.
Quarterly Journal of Economics: co-editor, 2011-2012.
Journal of Economic Perspectives: co-editor, 2007-2008.
Study Center, Gerzensee, Switzerland: summer-school course, 2011.
Northwestern University: visiting scholar, 2009.
B. Significant Non-Compensated Activities
Harvard Management Company: Board of Directors, 2015-present.
American Finance Association: President, 2008; President-Elect, 2007; Vice-President, 2006; Board of Directors, 2009-2011.
Financial Advisory Roundtable, Federal Reserve Bank of New York, 2006-2012.
Squam Lake Group, 2008-2012.
*Excludes honoraria from non-profit institutions, government agencies, and academic journals of $3,000 or less in a given year, and payments from for-profit firms of $500 or less in a given year.