 Have Large Scale Asset Purchases Increased Bank Profits?Juan Antonio Montecino and Gerald Epstein Chapter 18 in The Political Economy of Central Banking, 2019, pp 454-478 from Edward Elgar Publishing Abstract: This paper empirically examines the effects of the Federal Reserve’s Large Scale Asset Purchases (LSAP) on bank profits. We use a new dataset on individual LSAP transactions and bank holding company data from the Fed’s FRY-9C regulatory reports to construct a large panel of banks for 2008Q1 to 2009Q4. Our results suggest that banks that sold Mortgage-backed Securities to the Fed (“treatment banks†) experienced economically and statistically significant increases in profitability after controlling for common determinants of bank performance. Banks heavily “exposed†to MBS purchases should also experience increases in profitability through asset appreciation. Our results also provide evidence for this type of spillover effect and suggest that large banks may have been more affected. Although our results suggest that MBS purchases increased bank profits, we find only mixed evidence that these were associated with increased lending. Our findings are thus consistent with the hypothesis that the Federal Reserve undertook these policies, at least in part, to increase the profitability of their main constituency: the large banks. Keywords: Economics and Finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:18820_18 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Chapters from Edward Elgar Publishing |
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