Search Results
Working Paper
A primer on farm mortgage debt relief programs during the 1930s
This paper describes New Deal farm mortgage debt relief programs, implemented through the Federal Land Banks and the Land Bank Commissioner. Along with the Home Owners' Loan Corporation, the analogous program for nonfarm residential mortgage borrowers, these were the first large-scale mortgage debt relief programs in US history.
Working Paper
Can a Bank Run Be Stopped? Government Guarantees and the Run on Continental Illinois
This paper analyzes the run on Continental Illinois in 1984. We find that the run slowed but did not stop following an extraordinary government intervention, which included the guarantee of all liabilities of the bank and a commitment to provide ongoing liquidity support. Continental's outflows were driven by a broad set of US and foreign financial institutions. These were large, sophisticated creditors with holdings far in excess of the insurance limit. During the initial run, creditors with relatively liquid balance sheets nevertheless withdrew more than other creditors, likely reflecting ...
Working Paper
The Resolution of a Systemically Important Insurance Company during the Great Depression
This paper explores the economic issues related to systemically important insurance companies, using an example from the Great Depression, the National Surety Company. National Surety was a large and diverse insurance company that experienced a major crisis in 1933 due to losses from its guarantees of mortgage-backed securities. A liquidity crisis ensued, as policyholders staged a massive run on the company, demanding the return of their unearned premiums. The New York State Insurance Commissioner stepped in with a reorganization plan that split the company in two, out of fear that a ...
Working Paper
Credit availability and the collapse of the banking sector in the 1930s
This paper examines the mechanism through which banking sector distress affects the availability of credit. We use the experience of the United States during the Great Depression, a period of intense bank distress, to conduct our analysis. We utilize previously neglected data from a 1934 survey conducted by the Federal Reserve System of both banks and Chambers of Commerce regarding the availability of credit, and examine which aspects of the banking system collapse affected credit availability as indicated by the survey. A number of scholars have posited different ways that bank distress ...
Working Paper
The prolonged resolution of troubled real estate lenders during the 1930s
This paper studies how building and loan associations (B&Ls) slowly unwound their obligations following a set of financial shocks during the Great Depression, with a special focus on a group of particularly troubled B&Ls in Newark, NJ. Investors in B&Ls disagreed over whether to realize losses on foreclosed real estate holdings, and those investors favoring liquidation were unable to force action after legal developments nullified statutory withdrawal privileges. In the medium run, a market-based resolution mechanism developed in the form of a secondary market for B&L liabilities. Liability ...
Working Paper
Old-Fashioned Deposit Runs
This paper characterizes the deposit runs that occurred in the commercial banking system during 2008 and compares them with deposit runs during the 1930s. The importance of withdrawals by large depositors is a strong source of continuity across the two eras and reflects the longstanding concentration of deposit holdings. Runs occurred during 2008 despite the presence of national deposit insurance, which does not fully cover large accounts and therefore has limited impact on the incentives of those account holders. Large depositors continue to represent a source of both market discipline and ...
Discussion Paper
Stigma and the Discount Window
One of the primary roles of central banks like the Federal Reserve is to provide liquidity to the financial system, particularly during periods of stress. The discount window is a critical tool for providing that liquidity. In this note, we discuss several topics related to stigma in depth and describe how concerns about stigma have influenced changes in Federal Reserve discount window policies.
Working Paper
When good investments go bad: the contraction in community bank lending after the 2008 GSE takeover
In September 2008, the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac were placed into conservatorship and dividend payments on common and preferred shares were suspended. As a result, share prices fell to nearly zero and many banks across the country lost the value of their investments in the preferred shares. We estimate more than 600 depository institutions in the United States were exposed to at least $8 billion in investment losses from these securities. In addition, fifteen failures and two distressed mergers either directly or indirectly resulted from the takeover. ...
Journal Article
Profits and balance sheet developments at U.S. commercial banks in 2009
Reviews recent developments in the balance sheets and in the profitability of U.S. commercial banks. The article discusses how developments in the U.S. banking industry in 2009 and early 2010 were related to changes in financial markets and in the broader economy.
Newsletter
Housing Markets in a Time of Crisis: A Historical Perspective
As the coronavirus (Covid-19) public health crisis unfolds, a second crisis in the economy is developing as well. One economic concern, among many, is the debt burden of households. Early reports point to a surge in unemployment claims during March 2020, raising the prospect that widespread unemployment is likely to impair the ability of households to make payments on their home mortgages and other loans in the months ahead. This represents a potential crisis in mortgage markets, as borrowers who are temporarily unemployed—but for an unknown period—may face default on their mortgages.