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

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  • RODNEY RAMCHARAN
  • STÉPHANE VERANI
  • SKANDER J. VAN DEN HEUVEL

Abstract

How did the collapse of the asset‐backed securities (ABS) market during the 2007 to 2009 financial crisis affect the supply of credit to the broader economy? Using new data on the U.S. credit union industry, we find that ABS‐related losses are associated with a large contraction in the supply of credit to consumers, especially among those credit unions that began the crisis with weaker capitalization. We also find that this credit supply shock restricted the availability of mortgage and automobile credit. These results show how movements in the prices of financial assets can affect the real economy.

Suggested Citation

  • Rodney Ramcharan & Stéphane Verani & Skander J. Van Den Heuvel, 2016. "From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply," Journal of Finance, American Finance Association, vol. 71(3), pages 1323-1356, June.
    • Handle: RePEc:bla:jfinan:v:71:y:2016:i:3:p:1323-1356
    DOI: 10.1111/jofi.12209
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