Bailed-out Banks Issued Riskier Loans
ANN ARBOR, Mich.—Banks that received federal bailout money ended up approving riskier loans and shifting capital toward risky investments after getting government help, say University of Michigan researchers.
In a new study on risk-taking by banks that received funds from the Troubled Asset Relief Program, finance professors Ran Duchin and Denis Sosyura of Michigan’s Ross School of Business found that the overall risk level of TARP banks increased 10 percent. Further, these banks were no more likely to issue loans, overall, than non-TARP banks, in contrast to the declared objective of the federal program to increase lending. (more…)