Abstract: We investigate whether unequal access explains why low-income and Black households use bank branches less than high-income and White households, despite relying on them more. We obtain a measure of access from a gravity model of consumer trips to bank branches, estimated using mobile device geolocation data. We find no evidence that low-income communities lack access, and instead find that lower demand for branch products or services explains their lower branch use. But in Black communities, poor access explains their entire drop-off in branch use. The results spotlight areas of the country to best target policies expanding access to banking.
Discussant: Pengfei Ma, Singapore Management University
Marco Macchiavelli, University of Massachusetts-Amherst
Jonathan Wallen, Harvard University
Abstract: e study the internal and external capital markets of large U.S. bank holding companies. Within the bank holding company, commercial bank and dealer divisions have different investment opportunities, raise capital externally and actively share some capital internally. We develop and test a simple model where a bank division raises funding from both internal and external capital markets subject to frictions. Empirically, we measure marginal returns to dealer investment opportunities using arbitrage spreads. We show that when spreads widen, the dealer raises additional capital through both internal and external markets. The dealer raises 3 times more capital internally than externally, implying that there are larger frictions to external capital. However, both sources of additional capital are slow to respond to investment opportunities. These internal and external frictions cause capital to be partially segmented. As a result, capital directly held by the dealer price its own investment opportunities, even when controlling for the liquidity of the bank holding company. We estimate that internal capital market efficiency is 10 percent relative to full efficiency.
Discussant: Denis Sosyura, Arizona State University
Wang Zhang, University of Illinois-Urbana-Champaign
Abstract: What is the geographic scope of the U.S. mortgage markets? Can local bank branches influence mortgage origination? We seek to answer these questions by investigating the discretion of bank branch managers. For identification, we examine the role of their idiosyncratic experiences with mortgage origination. Using a novel dataset identifying bank branch managers and their career histories, we find that managers' past experiences with mortgage approval and pricing significantly influence their subsequent lending decisions even after they switch employments across firms and locations. These effects are largely driven by non-managerial experiences, suggesting that our results do not purely capture managerial ``styles.'' Our results are stronger for jumbo loans and loans to riskier borrowers, but are weaker in areas with more lenders present and in cases of higher delegation costs. Fixing the manager-branch pair, we observe that mortgage lending outcomes respond strongly (weakly) to monetary policy shocks and bank stress test results when those shocks conform to (contradict) managers' experiences. Overall, our evidence is consistent with local bank branches significantly shaping mortgage origination.
Discussant: Kristle Cortés, University of New South Wales
