To test the capital crunch hypothesis we examine differences in the association between quarterly lending changes and beginning-of-the-quarter regulatory capital ratios during recessions versus expansions. Consistent with Bernanke and Lown (1991), Kishan and Opiela (2000 and 2006), and Kashyap and Stein (2000), we use OLS estimation of the following reduced form loan supply model to test H1.21 All continuous variables are winsorized at the top and bottom 1%, and all t-statistics in multivariate regressions are clustered by calendar quarters.