More capital could increase lending during pandemic – paper

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A research brief published last month by the Philadelphia Fed suggests US banks would increase lending under pandemic conditions if given access to more capital. The bulk of the new lending would come from smaller banks.

The paper, written by Pablo D’Erasmo, is based on a model of a US banking sector segmented between 10 large banks and a larger number of smaller banks. Using parameters from a Federal Reserve prediction exercise done at the start of the pandemic, D’Erasmo estimates what would

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