Search Results
Journal Article
How Much Do Guarantees and Bailouts Cost the Government?
Governments in advanced economies absorb a large and growing share of aggregate credit risk. That exposure arises from explicit and implicit contingent liabilities such as the ones that culminated in bailouts during the Global Financial Crisis (GFC) and from loan guarantees extended during the Covid-19 pandemic. Despite the growth of credit policy as a crisis response tool and substitute for traditional fiscal assistance, governments continue to underreport the associated costs and risks. More comprehensive and timely cost estimates, produced using a fair value framework, would increase ...
Conference Paper
Stock prices and fundamentals
Discussion Paper
Who holds the toxic waste? An investigation of CMO holdings
Toxic waste refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who holds them, and how much they hold. Very limited public information is available, but commercial banks are required to report on their holdings, and we investigate the extent to which the risk is concentrated in that sector.