Comment on Jayaratne and Wolken

This article comments on the paper by Jayaratne and Wolken that studies how bank consolidation has affected the small firm's access to capital. Explanations proposed by the authors for how the shrinkage of small banks affects the access of credit to small firms are reviewed. The prerequisite explanation of how small banks are different from large banks are given. The question of changes to expect in lending when a large bank acquires a small bank is addressed. The authors' examination of marginal firms is reviewed. The finding that no long-term reduction in credit to small firms resulted from the shrinkage of banks is noted. The suggestion that some of the shrinkage may be due to over capacity is explored.