We show evidence that interest rate hikes slowdown loan growth but lead intermediation
to migrate from banks' balance sheets to non-banks via increased securitization activity.
As such, higher interest rates have the potential for unintended consequences; raising
systemic risk rather than lowering it by pushing more intermediation activity to more
weakly regulated sectors. In the past, this increased securitization activity was driven
primarily byb private-label securitization. On the other hand, the government sponsored
entities like Freddie Mac and Fannie Mae appear to react to higher policy rates by cutting
back on their securitization activity but expanding loans to the Federal Home Loan Bank