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Author:Black, Lamont K. 

Working Paper
The effect of TARP on bank risk-taking

One of the largest responses of the U.S. government to the recent financial crisis was the Troubled Asset Relief Program (TARP). TARP was originally intended to stabilize the financial sector through the increased capitalization of banks. However, recipients of TARP funds were then encouraged to make additional loans despite increased borrower risk. In this paper, we consider the effect of the TARP capital injections on bank risk taking by analyzing the risk ratings of banks? commercial loan originations during the crisis. The results indicate that, relative to non-TARP banks, the risk of ...
International Finance Discussion Papers , Paper 1043

Conference Paper
Differences across originators iin CMBS loan underwritten

Proceedings , Paper 1123

Working Paper
Bank core deposits and the mitigation of monetary policy

We consider the business strategy of some banks that provide relationship loans (where they have loan origination and monitoring advantages relative to capital markets) with core deposit funding (where they can pass along the benefit of a sticky price on deposits). These "traditional banks" tend to lend out less than the deposits they take in, so they have a "buffer stock" of core deposits. This buffer stock of core deposits can be used to mitigate the full effect of tighter monetary policy on their bank-dependent borrowers. In this manner, the business strategy of "traditional banks" ...
Finance and Economics Discussion Series , Paper 2007-65

Working Paper
Safe Collateral, Arm’s-Length Credit: Evidence from the Commercial Real Estate Market

There are two main creditors in commercial real estate: arm?s-length investors and banks. We model commercial mortgage-backed securities (CMBS) as the less informed source of credit. In equilibrium, these investors fund properties with a low probability of distress and banks fund properties that may require renegotiation. We test the model using the 2007-2009 collapse of the CMBS market as a natural experiment, when banks funded both collateral types. Our results show that properties likely to have been securitized were less likely to default or be renegotiated, consistent with the model. ...
Working Paper Series , Paper 2017-19

Working Paper
Safe Collateral, Arm's-Length Credit : Evidence from the Commercial Real Estate Mortgage Market

When collateral is safe, there are less opportunities for things to go wrong. We examine matching between collateral and creditors in the commercial real estate mortgage market by comparing loans in commercial mortgage backed securities (CMBS) conduits and bank portfolios. We model CMBS financing as lower cost but less informed, such that only safe collateral is funded by CMBS. This prediction is tested using the 2007-2009 shutdown of the CMBS market as a natural experiment. The loans funded by banks that would have been securitized are less likely to default or be renegotiated, indicating ...
Finance and Economics Discussion Series , Paper 2017-056

Working Paper
Insider rates vs. outsider rates in lending

The presence of private information about a firm can affect the competition among potential lenders. In the Sharpe (1990) model of information asymmetry among lenders (with the von Thadden (2004) correction), an uninformed outside bank faces a winner?s curse when competing with an informed inside bank. This paper examines the model?s prediction for observed interest rates at an inside vs. outside bank. Although the outside bank wins more bad firms than the inside bank, the winner?s curse also causes the outside rate conditional on firm type to be lower in expectation than the inside rate ...
Finance and Economics Discussion Series , Paper 2008-36

Working Paper
Differences across originators in CMBS loan underwriting

Differences in the organizational structure of CMBS loan originators may reflect differences in the incentives they face for underwriting risky loans. We treat an originator's type--that is, commercial bank, investment bank, insurance company, finance company, conduit lender, or foreign-owned entity--as a proxy for incentives related to warehousing risk, balance sheet lending, and regulatory constraints. After controlling for observable credit characteristics of over 30,000 loans securitized into CMBS after 1999, we find considerable differences in loan performance across originator types. ...
Finance and Economics Discussion Series , Paper 2011-05

Working Paper
Raising capital when the going gets tough: U.S. bank equity issuance from 2001 to 2014

The authors studied bank equity issuance during 2001?14 by publicly traded U.S. banks through seasoned equity offerings (SEOs), private investment in public equity (PIPEs), and the Troubled Asset Relief Program (TARP). Results show that private investors were an active and important source of bank recapitalization in the United States as issuance through SEOs and PIPEs peaked in the recent crisis.
Research Working Paper , Paper RWP 16-5

Working Paper
The bank lending channel of monetary policy and its effect on mortgage lending

The bank lending channel of monetary policy suggests that banks play a special role in the transmission of monetary policy. We look for this special role by examining the business strategies of banks as it relates to mortgage funding and mortgage lending. "Traditional banks" have a large supply of excess core deposits and specialize in information-intensive lending to borrowers (which is proxied here using mortgage lending in subprime communities), whereas "market-based banks" are funded with managed liabilities and mainly lend to relatively easy-to-evaluate borrowers. We predict that ...
Finance and Economics Discussion Series , Paper 2010-39

Newsletter
Managing Risk in the Recovery

The Chicago Fed's Supervision and Regulation Department, in conjunction with the Center for Financial Services at DePaul University?s Driehaus College of Business, held the seventh annual Financial Institution Risk Management Conference on April 8?9, 2014. The conference brought together business professionals, academics, and regulatory agency staff to discuss current risks and challenges facing a broad range of financial institutions.
Chicago Fed Letter , Issue Nov

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