Search Results
Working Paper
Banking relationships and sell-side research
This paper examines disclosures by sell-side analysts when their institution has a lending relationship with the firms being covered. Lending-affiliated analysts? earnings forecasts are found to be more accurate relative to forecasts by other analysts but this differential accuracy manifests itself only after the advent of the loan. Despite this increased earnings forecast accuracy, lending-affiliated analysts exhibit undue optimism in their brokerage recommendations and forecasts of long term growth. The optimism exists both before and after the lending commences. The evidence suggests that ...
Working Paper
Community banks as small business lenders: the tough road ahead
This paper investigates the performance of community banks as small business (relationship) lenders. Theory suggests that competition reduces the benefits of bank?borrower relationships, making small business loans more risky and less profitable. In support of this theory, the evidence indicates that community banks? performance deteriorates with increasing small business lending. Policies that encourage community banks to engage in more aggressive small business lending may lessen the soundness of these institutions.
Journal Article
When States Default: Lessons from Law and History
This Commentary discusses how a severe fiscal crisis at the state level could impact the interests of the state?s public pension holders. Drawing lessons from the relevant laws, historical precedents, and the case of Arkansas after its default in 1933, I argue that in spite of the protections that exist, no public retirement system is completely immune to impairment if the money runs out.
Working Paper
Homeownership for the long run: an analysis of homeowner subsidies
This paper examines the impact of interest-rate and down-payment subsidies on default rates and losses given default, and finds that down-payment subsidies create successful homeowners at a lower cost than interest-rate subsidies.
Journal Article
Trouble ahead for student loans?
The market for student loans may differ in some respects from other financial markets, but private lenders are the primary source of funds. As in other markets, the incentive to lend those funds comes from the ability to make a profit. But recent turmoil in financial markets is affecting all of the factors that contribute to the profitability of student loans, leading to speculation that the availability of such loans will fall.
Journal Article
Are we like Sweden? recovery in the labor market
More than 20 years ago Sweden suffered a severe financial crisis that brought unemployment to an all-time high. To this day the unemployment rate has not returned to where it was before the crisis. Economists say that if the U.S. is anything like Sweden, our full recovery may still be a long way off. Sweden is like the U.S. in many ways, but the roots of its labor market troubles appear to be very different from ours.
Journal Article
Do bank branches matter anymore?
Bank branches have been disappearing in some major metropolitan areas, as their populations and economic activity decline. Our research suggests that brick-and-mortar branches provide tangible benefi ts to consumers, especially in low- and moderate-income neighborhoods. When branches are located in these areas, borrowers living there default less and have greater access to credit.
Journal Article
Prepayment penalties on subprime mortgages
As a result of the subprime mortgage mess, prepayment penalties are under close scrutiny. While these, like other kinds of contract terms, can be abused, there are good reasons for why they exist. In principle, they serve to extend credit to a greater number of borrowers.
Working Paper
Bank branch presence and access to credit in low-to-moderate income neighborhoods
Banks specialize in lending to informationally opaque borrowers by collecting soft information about them. Some researchers claim that this process requires a physical presence in the market to lower information collection costs. The author provides evidence in support of this argument in the mortgage market for low-income borrowers. Mortgage originations increase and interest spreads decline when there is a bank branch located in a low-to-moderate income neighborhood.
Journal Article
Securitization
Obscure just 20 years ago, loan portfolio securitization by private and government-sponsored enterprises is a $5 trillion business today. This Commentary explains the reasons behind the spectacular growth of asset-backed securities.