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Working Paper
National bank notes and silver certificates
From 1883 to 1892, the circulation of national bank notes in the United States fell nearly 50 percent. Previous studies have attributed this to supply-side factors that led to a decline in the profitability of note issue during this period. This paper provides an alternative explanation. The decline in note issue was, in large part, demand-driven. The presence of a competing currency with superior features caused the public to substitute away from national bank notes.
Journal Article
Federal funds futures as an indicator of future monetary policy: a primer
An analysis of how federal funds futures markets are efficient processors of information concerning the future path of the fed funds rate and a discussion of some related implications for central-bank policymaking.
Journal Article
FSLIC forbearances to stockholders and the value of savings and loan shares
An investigation of the value of FSLIC forbearances to the stockholders of insolvent stock-chartered thrift institutions, concluding that these forbearances increase the stock-market value of thrift institutions.
Journal Article
The evolving loan sales market
An examination of the continuing strength of the loan sales market, documenting its growth during the latter half of the 1980s, its subsequent downturn in the early 1990s, the effect of merger and acquisition activity, and the impact of the 1990-91 recession, plus a discussion of how these issues relate to the rationales for federal deposit insurance and bank regulation.
Working Paper
Deposit insurance and the cost of capital
The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes.
Journal Article
Forbearance, subordinated debt, and the cost of capital for insured depository institutions
Using an explicit model for subordinated debt that considers the possibility of FDIC forbearances, the authors show that forbearance 1) alters the required rate of return on subordinated debt while increasing its market value and 2) weakens the effectiveness of such debt as a source of market discipline.
Journal Article
The truth about hedge funds
Do hedge funds help or hurt the financial markets in which they operate? The highly publicized troubles of Long Term Capital Management have once again focused the attention of policymakers and the press on the hedge fund industry and the cry for its regulation. This Economic Commentary refutes some of the commonly held myths about hedge funds and examines the rationale for regulating them.
Working Paper
Anticipating bailouts: the incentive-conflict model and the collapse of the Ohio Deposit Guarantee Fund
An examination of the effect of the collapse of the Ohio Deposit Guarantee Fund on insured financial institutions in the context of the incentive-conflict model developed by Edward Kane, finding that differences in abnormal returns of FDIC and FSLIC firms tend to reaffirm that taxpayer-funded bailouts are a natural outgrowth of the moral-hazard problem that taxpayers face.
Journal Article
The RTC and the escalating costs of the thrift insurance mess
An examination of the structure of the Resolution Trust Corporation and of its performance in resolving the savings and loan insurance crisis, defining the obstacles that may be impeding the RTC's effectiveness in closing insolvent thrifts and returning their assets to the private sector.
Working Paper
SBA guaranteed lending and local economic growth
Increasingly, policymakers look to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration's (SBA) loan-guarantee program. Using a panel data set of SBA guaranteed loans, we assess whether SBA guaranteed lending has an observable impact on local economic performance. We find a positive and significant (although economically small) relationship ...