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

54 Pages Posted: 4 Apr 2013

See all articles by Rodney Ramcharan

Rodney Ramcharan

University of Southern California, Marshall School of Business

Skander Van den Heuvel

Federal Reserve Board

Stephane Verani

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: December 5, 2012

Abstract

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.

Keywords: Asset backed securities, credit supply, credit unions

JEL Classification: G01, G10, G20

Suggested Citation

Ramcharan, Rodney and Van den Heuvel, Skander and Verani, Stephane, From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply (December 5, 2012). FEDS Working Paper No. 2013-10. Available at SSRN: https://ssrn.com/abstract=2244545 or http://dx.doi.org/10.2139/ssrn.2244545

Rodney Ramcharan

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/

Skander Van den Heuvel

Federal Reserve Board ( email )

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

Stephane Verani (Contact Author)

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

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