U.S. commercial bank lending through 2008:Q4: new evidence from gross credit flows

Silvio Contessi and Johanna L. Francis ()

No 2009-011, Working Papers from Federal Reserve Bank of St. Louis

Abstract: How have U.S. commercial banks responded during the current financial crisis? What was hiding behind the dynamics of aggregate commercial bank loans through the end of 2008? We use balance sheet data for the entire population of commercial banks to construct quarterly gross credit flows (credit expansion and credit contraction series) for the U.S. banking system during the period 1999:Q1-2008:Q4 and provide new evidence on changes in lending. We show that credit expansion, as defined in this paper, began declining during the first half of 2008 while credit contraction began steeply increasing only between the third and fourth quarters of 2008. Until then net credit growth was below trend but positive and not dissimilar to the 1980 and 2001 recessions. However, between the third and fourth quarter credit contraction grew larger than credit expansion across all types of loans (real estate, individual, commercial, and industrial loans) and for the largest banks. On the contrary, smaller banks continued to display positive net credit growth. Once we include 2008:Q4 data, the cyclical properties of our series most resemble the beginning of the 1991 recession and the intensification of the Savings and Loan crisis.

Keywords: Financial crises; Business cycles; Credit (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
Date: 2009
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Working Paper: U.S. Commercial Bank Lending through 2008:Q4: New Evidence from Gross Credit Flows (2009)
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