Search Results
Journal Article
What's Driving Leveraged Loan Spreads?
Syndicated loan spreads have declined since the financial crisis, reducing the cost of credit for corporate borrowers. However, the combination of aggressive loan pricing and weaker credit protections has concerned market observers. We find that syndicated loan spreads have declined across loan and borrower types since the crisis. We also find the decline has been more pronounced for highly leveraged borrowers and has accelerated since 2016, especially for term loans.
Working Paper
Bank Capital Pressures, Loan Substitutability, and Nonfinancial Employment
We exploit the cross-state, cross-time variation in bank tangible capital ratios-brought about by bank branch deregulation on a state-by-state basis-to identify the effects of bank capital pressures on employment and firm dynamics during two waves of changes in bank capital regulation. We show that stronger capital pressures temporarily slowed down growth in employment in industries that depend on external finance, retarding growth in the average size of firms rather than in the number of firms. Such effects were particularly strong for smaller firms that may not have had access to national ...
Discussion Paper
The Relationship between Macroeconomic Overheating and Financial Vulnerability : A Quantitative Exploration
In this note, we explore the link between indicators of financial imbalances and macroeconomic performance, focusing on the experience of the United States. In an accompanying note, The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Narrative Investigation, we follow a narrative approach to review historical episodes of significant financial imbalances and examine whether these episodes were linked to macroeconomic overheating.
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.
Working Paper
Identifying Financial Crises Using Machine Learning on Textual Data
We use machine learning techniques on textual data to identify financial crises. The onset of a crisis and its duration have implications for real economic activity, and as such can be valuable inputs into macroprudential, monetary, and fiscal policy. The academic literature and the policy realm rely mostly on expert judgment to determine crises, often with a lag. Consequently, crisis durations and the buildup phases of vulnerabilities are usually determined only with the benefit of hindsight. Although we can identify and forecast a portion of crises worldwide to various degrees with ...
Working Paper
Less Bank Regulation, More Non-Bank Lending
Bank deregulation in the form of the repeal of the Glass-Steagall Act facilitated the entry of non-bank lenders into the market for syndicated loans during the pre-2008 credit boom. Institutional investors disproportionately purchase tranches of loans originated by universal banks able to cross-sell loans and underwriting services to firms (as permitted by the repeal). A shock to cross-selling intensity increases loan liquidity at origination and over time. The mechanism is that non-loan exposures ensure monitoring even when banks retain small loan shares. Our findings complement the ...