H ow did the collapse of the asset‐backed securities (ABS) market during the 2007 to 2009 financial crisis affect the supply of credit to the broader economy? Using new data on the U.S. credit union industry, we find that ABS‐related losses are associated with a large contraction in the supply of credit to consumers, especially among those credit unions that began the crisis with weaker capitalization. We also find that this credit supply shock restricted the availability of mortgage and automobile credit. These results show how movements in the prices of financial assets can affect the real economy.

We find that, in the early 20th century, counties in the United States where the agricultural elite had disproportionately large land holdings had significantly fewer banks per capita, even correcting for state‐level effects. Moreover, credit appears to have been costlier, and access to it more limited, in these counties. The evidence suggests that elites may restrict financial development in order to limit access to finance, and they may be able to do so even in countries with well‐developed political institutions.