Deposit insurance and credit union lending.

We exploit an exogenous change in the coverage of insured deposits following the passage of the Emergency Economic Stabilization Act (2008) to investigate the impact of deposit insurance on the volume, composition and quality of credit union lending. Using a difference-in-difference approach, we find changes in the volume, composition and riskiness of credit union lending. Specifically, we find that affected credit unions increase total and unsecured lending, leading to a decline in loan quality. Overall, our results suggest that an increase in the maximum coverage of insured deposits induces credit unions to lend more at the expense of loan quality. • We investigate whether deposit insurance affects credit union lending. • We use a change in deposit insurance coverage to overcome identification concerns. • This change was sudden and did not affect all credit unions equally. • Credit unions increase total and unsecured lending. • I Overall loan quality declinesFollowing the change in the maximum level of deposit insurance coverage. [ABSTRACT FROM AUTHOR]