Each of these assumptions was less obviously

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Unformatted text preview: substitute between other assets and lending to bank-dependent borrowers. Each of these assumptions was less obviously defensible after the financial innovations and regulatory changes of the 1980s and 1990s. Adrian and Shin (forthcoming a, b) discuss the changing structure of the U.S. U.S. financial system in more detail. Nonbank Nonbank financial intermediaries became increasingly important as sources of credit, particularly as a result of the growing popularity of securitization. Figure 1A shows the contributions of several categories of financial institutions to total net lending in the United States; while commercial banks are clearly still important, they are far from the only important source of credit. More importantly, both the recent lending boom and the more recent financial crisis had more to do with changes in financial flows of several of the other types shown in the figure; for example, lending by issuers of asset-backed securities surged in the period up until the summer of 2007 and then crashed, while lending by market-based mutual funds and and othe...
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