Search Results
Conference Paper
Is three a crowd? competition among regulators in banking
In some industries, firms are able to choose who regulates them. There is a long debate over whether regulatory competition is beneficial or whether it leads to a ?race for the bottom.? We introduce another aspect to this discussion. Regulators may desire a ?quiet life?, taking actions intended to minimize the effort they spend on work. Using banking as an example, we test this ?quiet life? hypothesis against other explanations of regulatory behavior. Banks are able to switch among three options for a primary federal regulator: the OCC, the Federal Reserve, and the FDIC. We examine why they ...
Conference Paper
The choice of regulators in banking
Newsletter
What do U.S. life insurers invest in?
Researchers at the Chicago Fed Insurance Initiative are analyzing the role that the insurance industry plays in financial markets and the economy as a whole. This article presents an overview of life insurers? financial asset holdings, the industries they invest in, and how the value of their investments would change if there was a large negative shock to asset values.
Working Paper
Research and development with asymmetric firm sizes
Newsletter
How liquid are U.S. life insurance liabilities?
This article describes the liquidity of various life insurance products and provides a measure that can be used to characterize the liquidity of the liabilities of the industry as a whole or of a particular firm.
Journal Article
Bubble, bubble, toil, and trouble
The rapid rise of real estate prices in recent years has led to fears of a housing price bubble. But, to determine whether there has been a bubble?and whether the bubble is bursting?one needs to know what home prices ?should? be. The authors estimate a simple model of home prices and find that prices were, on average, above their predicted levels during 2000?06. However, this result does not hold true uniformly across the country. To the extent that prices were overheating, this was happening largely in markets that have traditionally exhibited volatile prices
Working Paper
Measuring Interest Rate Risk in the Life Insurance Sector: The U.S. and the U.K.
We use a two factor model of life insurer stock returns to measure interest rate risk at U.S. and U.K. insurers. Our estimates show that interest rate risk among U.S. life insurers increased as interest rates decreased to historically low levels in recent years. For life insurers in the U.K., in contrast, interest rate risk remained low during this time, roughly unchanged from what it was in the period prior to the financial crisis when long-term interest rates were in their usual historical ranges. We attribute these differences to the heavier use of products that combine guarantees with ...
Working Paper
Do regulators search for the quiet life? the relationship between regulators and the regulated in banking
In some industries, firms are able to choose who regulates them. There is a long debate over whether regulatory competition is beneficial or whether it leads to a race for the bottom. We introduce another possible issue with regulation. Regulators may take actions intended to minimize the effort they spend on work. Using banking as an example, we test this quiet life hypothesis against other explanations of regulatory behavior. Banks are able to switch among three options for a primary federal regulator: the OCC, the Federal Reserve, and the FDIC. We examine why they switch and what the ...
Working Paper
Why do borrowers make mortgage refinancing mistakes?
Refinancing a mortgage is often one of the biggest and most important financial decisions that people make. Borrowers need to choose the interest rate differential at which to refinance and, when that differential is reached, they need to take the steps to refinance before rates change again. The optimal differential is where the interest saved by refinancing equals the sum of refinancing costs and the option value of refinancing. Using a unique panel data set, we find that approximately 59% of borrowers refinance sub-optimally ? with 52% of the sample making errors of commission (choosing ...