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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.

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  1. Yellen [2013].

  2. See also D’Arista and Epstein [2010] and Pozsar et al. [2010].

  3. This literature is surveyed in Allen and Babus [2009]. Other early contributions are Freixas et al. [2000] and Dasgupta [2004].

  4. In keeping with the literature and the Federal Reserve’s definition, we will refer to claims between financial institutions but within the financial sector as “intra-financial sector lending.” We will also refer to this interchangeably as simply “intra-financial lending.”

  5. See

  6. We will refer to data from the FR Y-15 report below as a robustness check on our own estimates.

  7. Bhatia and Bayoumi limited their analysis to asset stocks.

  8. See the data appendix for more detail.

  9. See the appendix for a more detailed explanation.

  10. See Table A5 in the appendix for a description of the instrument series.

  11. For a detailed explanation of how FoF series codes are structured see the FoF’s online guide at:

  12. This was ascertained through private correspondences with economists at the Flow of Funds division of the Federal Reserve.


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The authors thank the Institute for New Economic Thinking (INET) for financial support and participants in workshops at the University of Massachusetts, Amherst and the New School for Social Research for helpful comments.

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Correspondence to Juan Antonio Montecino.



Table A1

Table A1 Baseline intra-financial asset share by instrument, decade averages

Table A2

Table A2 Intra-financial asset share by instrument excluding the Federal Reserve, decade averages

Figure A1

Figure A1
figure 8

Change in α’s between 1950–2012

Source: Authors’ calculations based on the flow of funds. Note: AGB=agency & GSE-backed securities, CFB=corporate & foreign bonds, CEQ=corporate equities, MIS=loans n.e.c., OMP=open market paper, OTH=other loans & advances, SEC=security credits.

Data appendix

As explained above, we assume that a share α of each type of financial sector asset translates into liabilities for the financial sector. The share α is estimated as follows: let l i f and L i be the liabilities of instrument i held, respectively, by the financial sector and all sectors combined. The share α of each instrument i is simply l i f /L i . α’s are calculated for each year.

Table A3 shows the FoF code for each series used to calculate the baseline α shares (i.e., those that include the Federal Reserve).Footnote 11 For instance, the α for open market paper is calculated as:

Table A3 Baseline α summary statistics

In order to remove the Federal Reserve from checkable deposits and currency, we calculate a separate α for Federal Reserve liabilities. This α equals

The amount of intra-financial assets of checkable deposits and currency were thus calculated as

In the case of net inter-bank transactions and federal funds and repurchase agreements it was possible to identify and therefore directly subtract Federal Reserve assets and liabilities from financial sector asset stocks and lending flows in both instrument categories. This is necessary in order to avoid counting lending by the Federal Reserve as well as lending to the Federal Reserve. For net interbank transactions, we subtract Federal Reserve assets in this category (FL714010005), which include floats and loans to domestic banks; and also subtract Federal Reserve liabilities (FL714110005), which include depository institutions’ reserves and vault cash. For federal fund and repurchase agreements, we subtract the Federal Reserve’s reverse repurchase agreements (FL712150003) from total financial sector assets (Table A4).

Table A4 Alpha summary statistics excluding the federal reserve

Table A5 presents the underlying series used for the calculation of intra-financial assets and lending for each instrument category. For instance, the total assets of the instrument category agency and GSE-backed securities is calculated as the sum of these instruments held by the sub-sector series including US-chartered depositary institutions (FA763061705), mutual funds (FA653061703), issuers of asset-backed securities (FA673061705), and so on. Detailed descriptions of each series are available in the FoF online guide ( by searching for the appropriate series code.

Table A5 Flow of funds series used to calculate baseline α’s

It is worth mentioning one aspect of how the instrument categories are organized. In cases when types of instruments have been securitized, the broad instrument categories include both the underlying class of asset as well as the securitized product.Footnote 12 For instance, the other loans and advances category includes both collateralized loan obligations and the underlying business loans these are based on. Similarly, the agency and GSE-backed securities category includes both the original mortgage pools as well as the resulting mortgage- backed securities. In these instances we take care to only count the instrument sub-categories that result in intra-financial claims and not those that evidently represent claims on other sectors, for example, households or non-financial business (Tables A6 and A7).

Table A6 Flow of funds financial sector asset series
Table A7 Instrument category descriptions

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Montecino, J., Epstein, G. & Levina, I. Long-Term Trends in Intra-Financial Sector Lending in the United States (1950–2012). Eastern Econ J 42, 611–629 (2016).

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  • finance
  • intra-financial lending
  • financial crisis


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