Motivating Banks to Lend? Credit Spillover Effects of the Main Street Lending Program

64 Pages Posted: 26 Jan 2021 Last revised: 9 Jan 2024

See all articles by Camelia Minoiu

Camelia Minoiu

Federal Reserve Bank of Atlanta

Rebecca Zarutskie

Board of Governors of the Federal Reserve System

Andrei Zlate

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: January 6, 2024

Abstract

We study the effects of the Main Street Lending Program (MSLP), a novel emergency facility deployed by the Federal Reserve during the Covid-19 pandemic, on the provision of bank credit to nonfinancial firms. Using instrumental variables for identification, we show the MSLP increased banks' willingness to lend more generally outside the program, both on the extensive and intensive margins. Participating banks were relatively more likely to originate new loans, increase loan volumes, and reduce loan spreads. Spillovers were stronger for ex-ante riskier firms and for lower-capital banks, suggesting the program increased risk-taking and mitigated financial constraints at banks.

Keywords: Main Street Lending Program, Federal Reserve, bank lending, U.S. credit register, emergency lending facilities

JEL Classification: G21, E52, E58, E63

Suggested Citation

Minoiu, Camelia and Zarutskie, Rebecca and Zlate, Andrei, Motivating Banks to Lend? Credit Spillover Effects of the Main Street Lending Program (January 6, 2024). Available at SSRN: https://ssrn.com/abstract=3773242 or http://dx.doi.org/10.2139/ssrn.3773242

Camelia Minoiu (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Rebecca Zarutskie

Board of Governors of the Federal Reserve System ( email )

20th Street and C Streets NW
Mailstop 155-B
Washington, DC 20551
United States
202-452-5292 (Phone)

Andrei Zlate

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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