December 2012

From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply

Rodney Ramcharan, Skander Van den Heuvel, and Stephane Verani


This paper studies how the collapse of the asset backed securities (ABS) market during the financial crisis of 2007-2009 affected the supply of credit to the broader economy using a new dataset that describes unique interbank relationships within the credit union industry. This industry is important for consumer finance, and we find that ABS related losses at correspondent credit unions are associated with a large contraction in the supply of consumer credit and a hoarding of cash among downstream credit unions. We also find that this contraction in credit supply was concentrated among downstream credit unions that began the crisis with lower capital asset ratios, and that it may have amplified the initial decline in house prices. These results suggest that capital regulation might shape the ability of financial institutions to transmit securities price volatility onto the real economy.

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Keywords: Asset backed securities, credit supply, credit unions

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Last Update: June 26, 2020