We find that corporate loan contracts frequently concentrate control rights with a subset of lenders. Despite the rise in term loans without financial covenants—so-called covenant-lite loans—borrowing firms’ revolving lines of credit almost always retain traditional financial covenants. This split structure gives revolving lenders the exclusive right and ability to monitor and to renegotiate the financial covenants, and we confirm that loans with split control rights are still subject to the discipline of financial covenants. We provide evidence that split control rights are designed to mitigate bargaining frictions that have arisen with the entry of nonbank lenders and became apparent during the financial crisis.

Relying on theories in which bank create private money by making loans that create deposits—a process we call “funding liquidity creation”—we measure how much funding liquidity the U.S. banking system creates. Private money creation by banks enables lending to not be constrained by the supply of cash deposits. During the 2001–2020 period, 92 percent of bank deposits were due to funding liquidity creation, and during 2011–2020 funding liquidity creation averaged $10.7 trillion per year, or 57 percent of GDP. Using natural disasters data, we provide causal evidence that better-capitalized banks create more funding liquidity and lend more even during times when cash deposit balances are falling or unchanged. Large banks as well as the top banks in Federal Reserve districts create more liquidity.

This paper finds that banks and nonbanks respond differently to increased competition in consumer credit markets. Increased competition and a greater threat of failure induces banks to specialize in relationship business lending, and surviving banks are more profitable. However, nonbanks change their credit policy when faced with more competition and expand credit to riskier borrowers at the extensive margin, resulting in higher default rates. These results show how the effects of competition depend on the form of intermediation. They also suggest that increased competition can cause credit risk to migrate outside the traditional supervisory umbrella.

This paper investigates the impact of unconventional monetary policy on firm financial constraints using the maturity extension program (MEP). Consistent with bond market segmentation and limits to arbitrage, around the MEP's announcement, stock prices rose for those firms more dependent on longer-term debt. These firms also issued more long-term debt during the MEP and expanded employment and investment. There is also evidence of “reach for yield” behavior, as the demand for riskier corporate debt also increased. Our results suggest that unconventional monetary policy might have relaxed financial constraints for some firms by inducing gap-filling behavior and affecting bond market risk premia.

Using new employer-employee matched data, this paper investigates the impact of uncertainty, as measured by idiosyncratic stock market volatility, on individual outcomes. We find that firms provide at best partial insurance to their workers. Increased firm-level uncertainty reduces total compensation, especially variable pay, and workers reduce their durable goods consumption in response. Such shocks also lead to greater financial fragility among lower-income earners. Constructing a new county-level uncertainty shock, we find that local uncertainty shocks reduce county-level durable consumption. Taken together, these findings show that uncertainty shocks can significantly affect local economic activity through households’ consumption and savings decisions.