Federal Reserve financial crisis lending programs and bank stock returns

Ken B. Cyree, Mark D. Griffiths, Drew B. Winters

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


We use an E-GARCH model to estimate the wealth effects of Federal Reserve lending during the financial crisis to Investment banks (I-Banks), "Too Big to Fail" (TBTF) banks, and "traditional" commercial banks. Borrowing from the Term Auction Facility program has negative wealth effects for all banks and I-banks in particular. We also find that the market view of the liquidity programs changed across the sample sub-periods. I-Bank and TBTF bank borrowing from the discount window is initially viewed positively, however continued use of the discount window and the Term Auction Facility was generally (though not universally) viewed negatively. Commercial Paper Funding Facility program participation is consistently positive only for traditional banks and programs that focus on the purchase of specific securities (e.g., commercial paper) to address specific problems also appear to primarily benefit traditional banks. The inconsistency of results across the time periods of the crisis is telling as market participants struggled to discern what access to these programs meant.

Original languageEnglish
Pages (from-to)3819-3829
Number of pages11
JournalJournal of Banking and Finance
Issue number10
StatePublished - 2013


  • Federal Reserve liquidity programs
  • Financial crisis
  • Too Big to Fail


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