Shadow Bank Distress and Household Debt Relief: Evidence from the CARES Act
AEA Papers and Proceedings
vol. 112,
May 2022
(pp. 509-15)
Abstract
Shadow banks service a substantial portion of household debt in the United States, including half of residential mortgages. They also funded and implemented a large portion of the CARES Act-driven debt relief. Despite uniform policy and similar borrowers, shadow banks offered debt forbearance at a significantly lower (27 percent) rate compared to traditional banks. Better-capitalized shadow banks offered forbearance at a much higher rate, and those with larger exposure to servicing related liquidity shocks reduced this exposure by selling their servicing rights. We highlight the fragility of shadow bank servicing during downturns that can impede the pass-through of debt relief to households.Citation
Cherry, Susan, Erica Jiang, Gregor Matvos, Tomasz Piskorski, and Amit Seru. 2022. "Shadow Bank Distress and Household Debt Relief: Evidence from the CARES Act." AEA Papers and Proceedings, 112: 509-15. DOI: 10.1257/pandp.20221077Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth