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Journal Article
Capital requirements for financial firms
One of the reforms proposed for preventing financial crises is to require financial institutions to hold more capital. There are a number of unresolved issues related to such a requirement, ranging from the costs of increased capital requirements to the best way to structure them. Some of this research was presented at a recent conference, and we discuss the major findings in this Commentary.
Journal Article
Network externalities: the catch-22 of retail payments innovations
An investigation of one of the reasons why electronic payments have not yet supplanted cash and checks in retail transactions: Consumers willingness to use an innovation depends on the number of merchants who have already adopted it, and merchants willingness to invest in the innovation depends on the number of consumers who are already using it.
Journal Article
A conference on federal credit allocation
An overview of an October 1993 conference that examined the costs, causes, and consequences of credit allocation by the federal government, covering both the broad rationale for government intervention in U.S. credit markets and a number of specific programs and regulations.
Journal Article
FDICIA's prompt corrective action provisions
A review of the origins of FDICIA's early intervention policy and the political economy arguments for supporting it, with emphasis on the specific sections of the law that pertain to this policy and the ways in which the new guidelines will impact the future of the nation's depositories.
Working Paper
On credit spread slopes and predicting bank risk
The authors examine whether credit-spread curves, engendered by a mandatory subordinated-debt requirement for banks, would help predict bank risk. They extract the credit-spread curves each quarter for each bank in our sample, and analyze the information content of credit-spread slopes. They find that credit-spread slopes are significant predictors of future credit spreads. However, credit-spread slopes do not provide significant additional information on future bank-risk variables, over and above other bank-specific and market-wide information.
Working Paper
Capital forbearance and thrifts: an ex post examination of regulatory gambling
This paper estimates the losses embedded in the capital positions of the 996 FSLIC-insured savings and loan institutions that did not meet capital standards at the end of the 1970s. We compare the estimated cost of resolving the insolvencies of these institutions at the end of the 1970s with the actual failure-resolution costs for those that were closed by July 3 1, 1992, and the projected resolution costs for the remaining thrifts that are likely to be closed. Our results show that even when one considers only the direct costs associated with delayed closure of economically failed thrifts, ...
Journal Article
Resolving large, complex financial firms
How to best manage the failure of systemically important financial firms was the theme of a recent conference at which the latest research on the issue was presented. Here we summarize that research, the discussions that it sparked, and the areas where considerable work remains.
Journal Article
The Exchange Stabilization Fund: how it works
The increasingly controversial Exchange Stabilization Fund is used to influence the international value of the U.S. dollar and to provide aid to foreign countries. The debate surrounding the Fund will become more informed, the authors suggest, when observers understand how to calculate the total amount of resources available to the Fund. This Economic Commentary explains how the Fund's balance sheet figures must be adjusted to produce an accurate account of those resources.
Journal Article
Equity, efficiency, and mispriced deposit guarantees
A discussion of federal deposit insurance, with the contention that it can be misused and can help destabilize the financial system by permitting insured institutions to take irresponsible risks.
Journal Article
Federal funds futures as an indicator of future monetary policy: a primer
An analysis of how federal funds futures markets are efficient processors of information concerning the future path of the fed funds rate and a discussion of some related implications for central-bank policymaking.