THE ECONOMIC AND DISTRIBUTIVE EFFECTS OF CREDIT REGULATION

This paper deals with three basic types of consumer credit legislation and the likely effects that regulations implementating this legislation may have had. Before proceeding further, it is important to say something about the criteria to be used in evaluating what can be generally characterized as social legislation--legislation designed with some social objective in mind. The standard tool of the economist for evaluation of economic performance is the normative competitive model. Many question the applicability of this model in the role of evaluation since the legislation being examined more often than not will have come about because of a dissatisfaction with what is perceived to be a market result. More fundamentally, the market results that the legislation seeks to change are those that result from the distribution of income or wealth (broadly conceived) that is viewed as being less than satisfactory. By altering prices (broadly conceived), the legislation seeks to alter :his distribution. Thus, it is argued, the effects of the legislation can only be interpreted as "bad" since the benchmark for evaluation assumes, implicitly or explicitly, the original distribution of income (and the resulting set of market prices)

Small Business Evaluates Its Relationship with Commercial Banks

Characteristics of banks that serve small business are studied within the scope of formal studies that have been completed. Apparently larger, primarily urban, banks are less able to provide the personal contacts that small business owners want in dealing with a banking institution

Bank Structure and Small Business Loan Markets

The extant research on the impact of bank structure on bank service to local communities suggests that customers in local markets are better served by broader multi-office banking authority. Using survey data from a sample of over 4000 small businesses in April 1980, this paper analyzes the impact of branching status, bank size, and market size on average loan cost, bank competition for small firm business, credit availability and ratings of bank performance on desired services. The results of this study provide no evidence that banks in statewide branching environments provide better service to small businesses. Branching status was found to have no significant impact on loan costs or credit availability. Firms located in unit branching states had a significantly greater chance of being actively solicited by a bank for its business within the last five years. Banks in statewide branching states were more frequently given poor performance ratings across a broad dimension of desired characteristics in a banking relationship. On the basis of these data, the small business community would find no advantage to broader multi-office banking authority in states where it does not now exist

Rural Versus Urban Bank Performance: An Analysis of Market Competition for Small Business Loans

Using data from surveys of the National Federation of Independent Business (NFIB), an analysis is made to determine the competitiveness of rural versus urban banking markets. Looking at interest rates and credit availability there appears to be no less of a competitive position among rural banks. Service performance, which is subjectively derived, seems to be greater among rural banks