Working Paper
The Welfare Effects of Bank Liquidity and Capital Requirements
Van den Heuvel, Skander J. (2022-11-04)
The stringency of bank liquidity and capital requirements should depend on their social costs and benefits. This paper investigates their welfare effects and quantifies their welfare costs using sufficient statistics. The special role of banks as liquidity providers is embedded in an otherwise standard general equilibrium growth model. Capital and liquidity requirements mitigate moral hazard from deposit insurance, which, if unchecked, can lead to excessive credit and liquidity risk at banks. However, these regulations are also costly because they reduce the ability of banks to create net ...
Finance and Economics Discussion Series , Paper 2022-072

Journal Article
The Main Street Lending Program
Arseneau, David M.; Van den Heuvel, Skander J.; Fillat, José; Morgan, Donald P.; Mahar, Molly (2022-06-01)
The Main Street Lending Program was created to support credit to small and medium-sized businesses and nonprofit organizations that were harmed by the pandemic, particularly those that were unsupported by other pandemic-response programs. It was the most direct involvement in the business loan market by the Federal Reserve since the 1930s and 1940s. Main Street operated by buying 95 percent participations in standardized loans from lenders (mostly banks) and sharing the credit risk with them. It would end up supporting loans to more than 2,400 borrowers and co-borrowers across the United ...
Economic Policy Review , Volume 28 , Issue 1

Working Paper
The Demand for Short-Term, Safe Assets and Financial Stability: Some Evidence and Implications for Central Bank Policies
Carlson, Mark A.; Nelson, William R.; Van den Heuvel, Skander J.; Stein, Jerome L.; Duygan-Bump, Burcu; Ochoa, Marcelo; Natalucci, Fabio M. (2014-11-25)
A number of researchers have recently argued that the growth of the shadow banking system in the years preceding the recent U.S. financial crisis was driven by rising demand for "money-like" claims--short-term, safe instruments (STSI)--from institutional investors and nonfinancial firms. These instruments carry a money premium that lowers their yields. While government securities are an important part of the supply of STSI, financial intermediaries also take advantage of this money premium when they issue certain types of low-risk, short-term debt, such as asset-backed commercial paper or ...
Finance and Economics Discussion Series , Paper 2014-102

Report
COVID Response: The Main Street Lending Program
Arseneau, David M.; Fillat, Jose; Mahar, Molly; Morgan, Donald P.; Van den Heuvel, Skander J. (2021-09-01)
The Main Street Lending Program was created to support credit to small and medium-sized businesses and nonprofit organizations that were harmed by the pandemic, particularly those that were unsupported by other pandemic-response programs. It was the most direct involvement in the business loan market by the Federal Reserve since the 1930s and 1940s. Main Street operated by buying 95 percent participations in standardized loans from lenders (mostly banks) and sharing the credit risk with them. It would end up supporting loans to more than 2,400 borrowers and co-borrowers across the United ...
Staff Reports , Paper 984

Report
The Main Street Lending Program
Arseneau, David M.; Fillat, Jose; Morgan, Donald P.; Mahar, Molly; Van den Heuvel, Skander J. (2021-09-24)
The Main Street Lending Program was created to support credit to small and medium-sized businesses and nonprofit organizations that were harmed by the pandemic, particularly those that were unsupported by other pandemic-response programs. It was the most direct involvement in the business loan market by the Federal Reserve since the 1930s and 1940s. Main Street operated by buying 95 percent participations in standardized loans from lenders (mostly banks) and sharing the credit risk with them. It would end up supporting loans to more than 2,400 borrowers and co-borrowers across the United ...
Current Policy Perspectives