Long-Term Trends in Intra-Financial Sector Lending in the United States (1950-2012)

This paper examines the evolution of intra-financial sector lending in the United States, 1950-2012, constructing estimates from the Federal Reserve's Flow of Funds Accounts. Lending between financial institutions has grown nearly five-fold since the 1950s and currently accounts for roughly half of all financial sector lending. In the run up to the financial crisis of 2007-2008, the growth of intra-financial lending was concentrated in assets highly implicated in the genesis of the crisis, suggesting that this growth may have contributed to the crisis. This growth in intra-financial lending also raises questions about the contribution of the financial sector to the real economy.