in the work of carmen reinhardt and kenneth rogoff, and in that of christina and david romer, bis central bankers ’ speeches indicating that the severity of recessions and strength of the subsequent recovery are associated with the amount of financial distress experienced in a financial crisis. 1 there is also a strong likelihood that decreased credit demand – for example, from households whose homes fell in value below what they still owed on the mortgage – also has played a part in the slow growth of credit in this expansion, as has been expressed in the work of atif mian and amir sufi. 2 nevertheless, the patterns that i have reviewed here point to an adverse impact from a relatively weak banking sector on credit supply. however, it also suggests that the recent improvement in banks ’ financial condition should provide support to credit growth going forward, which in turn would provide support to the economic growth we project over the medium term. as i noted earlier, one area where credit has flowed freely is student lending. of course, an important factor distinguishing student loans from other forms of household debt is the fact that banks are far less important players and the federal government is instead the dominant lender. but this is just one factor that makes student loans unique, and i will now ask my colleagues to provide some more details on this important and fascinating market. christina d. romer and david h. romer, “ new evidence on the impact of financial crises in advanced countries, ” nber working paper no. 21021, march 2015 ; and carmen m. reinhart and kenneth s. rogoff, this time is different : eight centuries of financial folly, princeton, nj : princeton university press, 2009. atif mian and amir sufi, house of debt : how they ( and you ) caused the great recession, and how we can prevent it from happening again, university of chicago press, 2014 ; and a number of scholarly articles. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

expansion while they grew steadily in previous expansions ( figure 5 ). consumer credit has risen at a modest rate in this recovery – comparable to that of the last cycle ( figure 6 ). this category includes auto loans, credit cards and other consumer debts that are mainly originated by banks. but it also includes student loans where the federal government is the dominant lender. student loans have risen robustly during this expansion, and have driven much of the rise of overall consumer credit. we will have much more to say about them later in today ’ s briefing. the u. s. financial system relies more heavily on capital markets than other advanced economies. bonds and other negotiable debt instruments are an important source of funding to credit - worthy corporations. indeed, the growth rate of real nonfinancial corporate bonds outstanding during this expansion has been roughly similar to that of previous expansions ( figure 7 ). a similar pattern is evident in the commercial paper market ( figure 8 ). notwithstanding the robust performance of debt markets during this expansion, the sharper decline in outstanding bank loans to businesses that i mentioned earlier was likely a contributing factor to the slower economic recovery we have observed this time around. these developments appear to have had adverse consequences on the cost and availability of credit for bank - dependent borrowers. also, in the early years of this recovery, bankdependent firms appear to have deleveraged more and invested less than firms with access to capital markets. so, the impairment of banks ’ ability to extend credit still has the potential to hinder investment and adversely affect the overall economy. we see similar correlations when it comes to lending to households. the expansion in auto lending that commenced in 2010 coincided with a recovery in auto sales, which have now essentially regained the ground they lost during the recession. until recent quarters, overall consumption growth has been slow, consistent with a pattern of slow growth in credit card balances. the most obvious case is mortgages where – after a massive tightening from 2007 to early 2010 – underwriting standards remain very tight. this tightness, especially for nonprime borrowers, has likely been a factor behind a persistently sluggish housing market that has held back this recovery relative to earlier ones. overall, these patterns of credit growth support the idea that the weakness of banks at the end of the great recession has been a contributing factor to the slow recovery of the u. s. economy since the recession. these patterns are consistent with evidence provided