The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
Regional & Community Outreach connects the Bank to Main Street via structured dialogues and two-way conversations on small business, mortgages, and household credit.
Economic Education improves public knowledge about the Federal Reserve System, monetary policy implementation, and promoting financial stability through the Museum and programs for K-16 students and educators, and the community.
We provide measures of the size of the financial sector and its components, estimated relative to that of the total business (financial and nonfinancial) sector, and show how they relate to firm type, firm size and valuation. We find that the financial sector has been growing consistently since 1959, until reversed by the recent financial crisis. The relative size of finance is smaller when private firm liabilities are excluded. Although financial firms are more prevalent among large firms, on average large and small financial firms grew at similar rates. Shadow banks have doubled in size since the 1970s, and have grown consistently relative to traditional banks until the recent financial crisis. Small shadow banks have grown faster than large shadow banks, while the reverse is true for traditional banks. Finally, we find that, as compared to nonfinancial firms, the stock market has valued (as indicated by the market-to-book ratio) financial firms in general and traditional banks in particular lower, but shadow banks higher, and that this “value gap” has grown over time. Overall, these results show that growth in finance has mainly occurred in opaque, complex and less-regulated subsectors of finance.