Credit Supply Disruptions: From Credit Crunches to Financial Crisis

Posted: 18 Nov 2016

See all articles by Joe Peek

Joe Peek

Federal Reserve Banks - Federal Reserve Bank of Boston

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation

Multiple version iconThere are 2 versions of this paper

Date Written: October 2016

Abstract

It is useful to reflect on how the financial environment changed between the credit crunch episode of the early 1990s and the recent financial crisis. What did we learn from the earlier crisis, and how did the credit crunch literature help guide policy in the more recent crisis? Two important changes were the consolidation of the banking sector and the dramatic growth in nonbank financial intermediaries, which are much more susceptible than banks to liquidity risks because of a lack of deposit insurance. This article highlights that, although security broker-dealers, money market mutual funds, and issuers of asset-backed securities were not particularly important in the early 1990s, when the bank credit crunch occurred, they grew dramatically to become both major sources of financing and key elements in exacerbating the problems experienced during the recent financial crisis.

Suggested Citation

Peek, Joe and Rosengren, Eric S., Credit Supply Disruptions: From Credit Crunches to Financial Crisis (October 2016). Annual Review of Financial Economics, Vol. 8, pp. 81-95, 2016. Available at SSRN: https://ssrn.com/abstract=2870864 or http://dx.doi.org/10.1146/annurev-financial-121415-032831

Joe Peek (Contact Author)

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Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation ( email )

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Boston, MA 02210
United States
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