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

44 Pages Posted: 28 Aug 2012 Last revised: 15 Jan 2014

See all articles by Rodney Ramcharan

Rodney Ramcharan

University of Southern California, Marshall School of Business

Stephane Verani

Board of Governors of the Federal Reserve System

Skander Van den Heuvel

Federal Reserve Board

Multiple version iconThere are 2 versions of this paper

Date Written: January 15, 2014

Abstract

This paper studies how 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. We find that balance sheet losses at correspondent credit unions stemming from the collapse of the ABS market are associated with a large contraction in the supply of credit and a hoarding of cash among downstream credit unions. We also find that this credit crunch was concentrated among downstream credit unions which began the crisis with lower capital asset ratios, and that the contraction in credit supply may have amplified the initial decline in house prices. These results suggest that bank capital regulation might shape the ability of banks to transmit securities price volatility onto the real economy.

Keywords: credit, crisis, banking

JEL Classification: G20, G21, E50

Suggested Citation

Ramcharan, Rodney and Verani, Stephane and Van den Heuvel, Skander, From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply (January 15, 2014). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2137255 or http://dx.doi.org/10.2139/ssrn.2137255

Rodney Ramcharan (Contact Author)

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

Stephane Verani

Board of Governors of the Federal Reserve System ( email )

20th & C. St., N.W.
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/stephane-verani.htm

Skander Van den Heuvel

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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