 Safety‐Net Losses from Abandoning Glass–Steagall RestrictionsKenneth A. Carow, Edward Kane and Rajesh P. Narayanan Journal of Money, Credit and Banking, 2011, vol. 43, issue 7, 1371-1398 Abstract: This paper evaluates the redistribution of gains surrounding regulatory relaxations in 1996 and 1997 and ultimate passage of the Financial Services Modernization Act (FSMA) of 1999. Gains in financial institution stocks may come from projected increases in efficiency, increases in the bargaining power of financial institutions, or greater access to the federal safety net. For customers seeking improved access to capital markets, gains in efficiency should result in increased benefits, but increases in bank bargaining power could increase funding costs and/or decrease capital market access. Customers may also lose as taxpayers who support the federal safety net. This paper finds evidence of potential taxpayer losses and increased bank bargaining power, especially vis‐à‐vis credit‐constrained customers for whom safety‐net subsidies are unlikely to be shifted forward. The stock prices of credit‐constrained customers declined during FSMA event windows and in event windows associated with regulatory relaxations. Date: 2011 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:43:y:2011:i:7:p:1371-1398 Access Statistics for this article Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West More articles in Journal of Money, Credit and Banking from Blackwell Publishing |
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