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Chicago Fed Letter, No. 05, January 1988
Regulatory Burden Handicaps Low-Risk Banking

An increasing number of nonfinancial firms have discovered that raising funds in the commercial paper market is cheaper than borrowing funds from a bank. Indeed, between 1975 and 1986, banking's share of short-term borrowings by large manufacturing firms fell from 48 percent to 27 percent. Most of this loss in market share can be attributed to the growing importance of commercial paper. Since 1981, banking's share of total borrowings by these corporations has also been under pressure.

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