IMPACT OF THE CLINTON CREDIT AVAILABILITY PROGRAM ON COMMERCIAL-BANKS(POLICY PAPER)

This article investigates how President Clinton's program for increasi ng credit availability to small and medium-sized businesses affected b ank stocks. The pattern of results observed is consistent with the hyp othesis that the program promised to redistribute wealth through the f ederal safety net and not just to eliminate burdensome regulations. Ou r tests establish that potentially ''too-big-to-fail'' money-center ba nks benefited more than regional banks, and low-quality banks benefite d more than high-quality banks. Systematic risk for money-center banks increased with the program announcement, while risk of regional banks changed insignificantly. Risk differences correlate weakly with bank quality. Trading-volume tests suggest that investors agreed about prog ram implications, except for different degrees of skepticism about the ability of weak banks to horn in on program benefits. Except for bank s whose quality fell into the lowest ranking, trading volume was not s ignificantly disturbed.