Job Market Paper
Community Banking in the 21st Century Research and Policy Conference, 2021, University of Miami 2020
This paper estimates the elasticity of minority credit supply to deposit shares of Minority Depository Institutions (MDIs). Mortgage minority credit declines by 37% if a census tract loses MDI presence following an MDI-community bank merger. 1% increase in county market shares of such tracts leads to a 3% decrease in minority homeownership. Tracts that physically lose an MDI -branch experience worse outcomes suggesting that disruption of minority banking relationships contributes significantly to the observed minority credit decline. To generate exogenous variation in minority-bank presence, I use an instrument based on within-county tract-level variation in exposure to the Community Reinvestment Act.
Chicago Financial Institutions Conference, Indian School of Business Summer Research Conference (2nd Prize), Midwest Finance Association (MFA) Conference - 2021, University of Alabama, Micro-Economic Policy Seminar - George Mason University
Indraneel Chakraborty, Vidhi Chhaochharia, Rong Hai, Prithu Vatsa
For forty years, the Community Reinvestment Act (CRA) has encouraged U.S. banks to lend to lower-income neighborhoods. Regarding costs, to comply with CRA, banks substitute away from small-business lending to higher income groups and face higher default rates on loans made. Regarding benefits, a large number of Americans have been lifted out of poverty through the CRA small-business lending channel. New jobs in establishments and new entrepreneurship are equally strong mechanisms to alleviate poverty. The incidence of the act is on smaller banks who lend relatively more than larger banks. Taxpayers benefit from lower welfare expenses as poverty declines.
University of Miami 2018
After the Great Recession, commercial loan securitizers expanded their small business lending about four times faster compared to other banks. This sustained credit expansion had a positive impact on socioeconomic outcomes in geographies that were relatively more exposed to these banks. I document that for every percentage point increase in securtizers' share of county-level deposits, the growth rate of small businesses and employment provided by these businesses increases by 4 bps and 6 bps respectively. I extend these results to a household level and nd that a household's chances of making an out-of-poverty and out-of-unemployment transition in exposed geographies increase by 1.2% and 0.65% respectively. Finally, I document that most of these benets accrue to the non-tradable sector of the local economies