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Working Paper
Endogenous Debt Maturity and Rollover Risk
Brancati, Emanuele; Macchiavelli, Marco (2016-09-09)
We challenge the common view that short-term debt, by having to be rolled over continuously, is a risk factor that exposes banks to higher default risk. First, we show that the average effect of expiring obligations on default risk is insignificant; it is only when a bank has limited access to new funds that maturing debt has a detrimental impact on default risk. Next, we show that both limited access to new funds and shorter maturities are causally determined by deteriorating market expectations about the bank's future profitability. In other words, short-term debt is not a cause of ...
Finance and Economics Discussion Series , Paper 2016-074

Working Paper
Backtesting Systemic Risk Measures During Historical Bank Runs
Brownlees, Christian; Chabot, Benjamin; Ghysels, Eric; Kurz, Christopher J. (2015-07-02)
The measurement of systemic risk is at the forefront of economists and policymakers concerns in the wake of the 2008 financial crisis. What exactly are we measuring and do any of the proposed measures perform well outside the context of the recent financial crisis? One way to address these questions is to take backtesting seriously and evaluate how useful the recently proposed measures are when applied to historical crises. Ideally, one would like to look at the pre-FDIC era for a broad enough sample of financial panics to confidently assess the robustness of systemic risk measures but ...
Working Paper Series , Paper WP-2015-9

Speech
Some Perspectives on Regulatory Reform Proposals
Evans, Charles L. (2010-03-30)
Remarks at the Institute of Regulation & Risk North Asia March 30, 2010, Hong Kong, China
Speech , Paper 39

Working Paper
Did bank borrowers benefit from the TARP program : the effects of TARP on loan contract terms
Makaew, Tanakorn; Berger, Allen N.; Roman, Raluca (2015-09-01)
We study the effects of the Troubled Asset Relief Program (TARP) on loan contract terms to businesses borrowing from recipient banks. Using a difference-in-difference analysis, we find that TARP led to more favorable terms to these borrowers in all five contract terms studied ? loan amounts, spreads, maturities, collateral, and covenants. This suggests recipient banks' borrowers benefited from TARP. These findings are statistically and economically significant, and are robust to dealing with potential endogeneity issues and other checks. {{p}} The contract term improvements are concentrated ...
Research Working Paper , Paper RWP 15-11

Working Paper
Credit access after consumer bankruptcy filing: new evidence
Li, Wenli; Jagtiani, Julapa (2014-08-07)
Supersedes Working Paper No. 13-24 This paper uses a unique data set to shed new light on credit availability to consumer bankruptcy filers. In particular, the authors? data allow them to distinguish between Chapter 7 and Chapter 13 bankruptcy filings, to observe changes in credit demand and credit supply explicitly, and to differentiate existing and new credit accounts. The paper has four main findings. First, despite speedy recovery in their risk scores after bankruptcy filing, most filers have much reduced access to credit in terms of credit limits, and the impact seems to be long lasting ...
Working Papers , Paper 14-25

Working Paper
Too-Big-to-Fail before the Fed
Gorton, Gary; Tallman, Ellis W. (2016-05-06)
?Too-big-to-fail? is consistent with policies followed by private bank clearing houses during financial crises in the U.S. National Banking Era prior to the existence of the Federal Reserve System. Private bank clearing houses provided emergency lending to member banks during financial crises. This behavior strongly suggests that ?too-big-to-fail? is not the problem causing modern crises. Rather, it is a reasonable response to the threat posed to large banks by the vulnerability of short-term debt to runs.
Working Papers (Old Series) , Paper 1612

Working Paper
How Did Pre-Fed Banking Panics End?
Gorton, Gary; Tallman, Ellis W. (2016-01-14)
How did pre-Fed banking crises end? How did depositors? beliefs change? During the National Banking Era, 1863-1914, banks responded to the severe panics by suspending convertibility; that is, they refused to exchange cash for their liabilities (checking accounts). At the start of the suspension period, the private clearing houses cut off bank-specific information. Member banks were legally united into a single entity by the issuance of emergency loan certificates, a joint liability. A new market for certified checks opened, pricing the risk of clearing house failure. Certified checks traded ...
Working Papers (Old Series) , Paper 1603

Working Paper
Global Spillovers of a China Hard Landing
Goernemann, Nils; Dias, Daniel A.; Hoek, Jasper; Jain, Anil K.; Ahmed, Shaghil; Correa, Ricardo; Wong, Anna; Liu, Edith X. (2019-10-18)
China?s economy has become larger and more interconnected with the rest of the world, thus raising the possibility that acute financial stress in China may lead to global financial instability. This paper analyzes the potential spillovers of such an event to the rest of the world with three methodologies: a VAR, an event study, and a DSGE model. We find the sentiment channel to be the primary spillover channel to the United States, affecting global risk aversion and asset prices such as equity prices and the dollar, in addition to modest real effects through the trade channel. In comparison, ...
International Finance Discussion Papers , Paper 1260

Working Paper
Did saving Wall Street really save Main Street : the real effects of TARP on local economic conditions
Roman, Raluca; Berger, Allen N. (2015-10-01)
We investigate whether saving Wall Street through the Troubled Assets Relief Program (TARP) really saved Main Street during the recent financial crisis. Our difference-in-difference analysis suggests that TARP statistically and economically significantly increased net job creation and net hiring establishments and decreased business and personal bankruptcies. The results are robust, including accounting for endogeneity. The main mechanisms driving the results appear to be increases in commercial real estate lending and off-balance sheet real estate guarantees. These results suggest that ...
Research Working Paper , Paper RWP 15-13

Working Paper
Liquidity Crises in the Mortgage Market
Stanton, Richard; Laufer, Steven; Pence, Karen M.; Kim, You Suk; Wallace, Nancy (2018-03-08)
Non-banks originated about half of all mortgages in 2016, and 75% of mortgages insured by the FHA or VA. Both shares are much higher than those observed at any point in the 2000s. We describe in this paper how non-bank mortgage companies are vulnerable to liquidity pressures in both their loan origination and servicing activities, and we document that this sector in aggregate appears to have minimal resources to bring to bear in a stress scenario. We show how the same liquidity issues unfolded during the financial crisis, leading to the failure of many non-bank companies, requests for ...
Finance and Economics Discussion Series , Paper 2018-016

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