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Working Paper
Bank Fees, Aftermarkets, and Consumer Behavior
Fees for banking services have been a policy concern for over 20 years and the subject of several government agencies studies, which focused on the magnitude, incidence, or disclosure of such fees. Using a sample of single market banks, I study the relationship between market-level consumer characteristics and bank fee revenue, fees, and bank return on assets (ROA) to infer consumer and firm behavior. Of particular interest, I use county-level IRS tax records as a measure of the consumer income distribution, but my analysis also includes measures of age and education distributions. I find ...
Working Paper
Scale economies, scope economies, and technical change in Federal Reserve payment processing
In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. The payments industry has also undergone changes in cost structure with the introduction of new technology. Unfortunately, data on the private provision of payment processing services are not available. However, the Federal Reserve provides similar services and collects data on its own provision of payments processing, offering an opportunity to gain insights into the cost structure of payments ...
Working Paper
Where Are All the New Banks? The Role of Regulatory Burden in New Charter Creation
New bank formation in the U.S. has declined dramatically since the financial crisis, from well over 100 new banks per year to less than 1. Many have suggested that this is due to newly-instituted regulation, but the current weak economy and low interest rates (which both depress banking profits) could also have played a role. We estimate a model of bank entry decisions on data from 1976 to 2013 which indicates that at least 75% of the decline in new bank formation would have occurred without any regulatory change. The standalone effect of regulation is more difficult to quantify.
Working Paper
The effects of local banking market structure on the banking-lending channel of monetary policy
We study the relationship between banking competition and the transmission of monetary policy through the bank lending channel. Using business small loan origination data provided from the Community Reinvestment Act from 1996-2002 in our analysis, we are able to reaffirm the existence of the bank lending channel of monetary transmission. Moreover, we find that the impact of monetary policy on loan originations is weaker in more concentrated markets.
Working Paper
Scope and scale economies in Federal Reserve payment processing
In the past decade, the U.S. economy has witnessed a tremendous surge in the usage of electronic payment processing services and an increased importance of the firms that provide these services. The payments industry has also undergone changes in cost structure with the introduction of new technology. Unfortunately, data on the private provision of payment processing services are not available. However, the Federal Reserve provides similar services and collects data on its own provision of payments processing, offering an opportunity to gain insights into the cost structure of payments ...
Working Paper
Is Lending Distance Really Changing? Distance Dynamics and Loan Composition in Small Business Lending
Has information technology improved small businesses' access to credit by hardening the information used in loan underwriting and reducing the importance of proximity to lenders? Previous research, pointing to increasing average lending distances, suggests that it has. But this conclusion can obscure differences across loans and lenders. Using over 20 years of Community Reinvestment Act data on small business lending, we find that while average distances have increased substantially, distances at individual banks remain unchanged. Instead, average distance has increased because a small group ...
Working Paper
Consolidation and merger activity in the United States banking industry from 2000 through 2010
This study investigates trends in consolidation and merger activity in the United States banking industry from 2000 through 2010. Over this period, the U.S. banking industry has consistently experienced over 150 mergers annually, with the largest banking organizations holding an increasing share of banking assets. While the industry has undergone considerable consolidation at the national level, local banking markets have not experienced significant increases in concentration. The dynamics of consolidation raise concerns about competition, output, efficiency, and financial stability. This ...
Discussion Paper
Credit Card Profitability
Credit cards are one of the most ubiquitous consumer financial products in the United States, with more than 75 percent of households owning at least one general purpose credit card in 2019. According to the G.19 Consumer Credit Statistical release, revolving consumer credit, which mainly consists of credit cards and related plans, stood at over one trillion dollars at the end of 2021.
Working Paper
Who competes with whom? the case of depository institutions
Little empirical work exists on the substitutability of depository institutions. In particular, the willingness of consumers to substitute banks for thrifts and to switch between multimarket and single-market institutions (i.e., institutions with large vs. small branch networks) has been of strong interest to policymakers. We estimate a structural model of consumer choice of depository institutions using a panel data set that includes most depository institutions and market areas in the United States over the period 1990-2001. Using a flexible framework, we uncover utility parameters that ...