Abstract
- Data were gathered to examine the relative importance of liquidity infusions for commercial banks during the financial crisis. Many banks received such infusions from the FED in the fall of 2008, and many others received private debt and equity infusions of cash before and after the financial crisis. Our initial and continuing examinations of the data, and of the market responses to announcements of liquidity infusions, have not generated significant results for the announcement period, though longer term market responses are negative and significant. As many of the smaller and not systemically-risky banks were allowed to fail, or were “absorbed’ (purchased) by larger banks, we sense that much of the liquidity “story” was lost as a result of those “exits.” Within the sample examined, our ability to support our beliefs (that the cash was far more important for the distressed than the non-distressed banks that were “forced” to accept the infusions) was compromised.