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Author:Ergungor, O. Emre 

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.
Economic Commentary , Issue May

Journal Article
Theories of loan commitments: a literature review

A loan commitment is an agreement by which a bank promises to lend to a customer at prespecified terms while retaining the right to renege on its promise if the borrower's creditworthiness deteriorates. The contract also specifies the various fees that must be paid over the life of the commitment. Loan commitments are widely used in the economy. As their use has spread, a rich literature has evolved to explain why they exist, how they are priced, and how they affect the risk of the bank and the deposit insurer. This article summarizes what we have learned on these issues. Its main insight is ...
Economic Review , Issue Q III , Pages 2-19

Working Paper
Relationship loans and information exploitability in a competitive market: loan commitments vs. spot loans

Despite the numerous benefits of loan commitments, only 79% of the commercial and industrial loans are made under commitment. I show that two factors limit the use of loan commitments. First, because banks commit themselves to lend, they carry costly liquidity reserves to meet their obligations. Due to liquidity costs, the interest rate on commitment loans is high relative to spot loans. Second, high interest rates trigger moral hazard. If the bank expects a profitable relationship in the future, it can absorb a portion of the liquidity costs to reduce the interest rate and attenuate moral ...
Working Papers (Old Series) , Paper 0013

Journal Article

In recent years, there has been increasing pressure on U.S. corporations to distribute earnings to shareholders in the form of dividends. This Commentary explains that dividends are important, but investors can err by reading too much into them.
Economic Commentary , Issue Apr

Journal Article
The mortgage debacle and loan modifications

In today's increasingly sophisticated financial markets, loan modifications are often complex processes that involve multiple players with competing legal and financial interests. To better understand loan modifications, the Federal Reserve Bank of Cleveland hosted a one-day workshop in November 2007 featuring four financial and legal experts - Tony Saunders from Arizona State University, Steven Schwarcz from Duke University, Joseph Mason from Louisiana State University, and Kathleen Engel from Cleveland State University - who shared their knowledge and recommendations for possible solutions ...
Community Reinvestment Report , Issue Fall

Journal Article
Effective practices in crisis resolution and the case of Sweden

The current financial crisis is a painful reminder that the developed world is not yet immune to these devastating shocks. But while we haven?t learned to prevent them, we have learned some lessons about what is necessary to contain them once they begin and to limit the damage that follows. As policymakers worldwide focus on resolving the current financial crisis, they might look to Sweden as a useful model for effective strategies.
Economic Commentary , Issue Feb

Discussion Paper
Systemic banking crises

Systemic banking crises can have devastating effects on the economies of developing or industrialized countries. This Policy Discussion Paper reviews the factors that weaken banking systems and make them more susceptible to crises.
Policy Discussion Papers , Issue Feb

Journal Article
Home price derivatives

Until recently, homeowners had no way to protect the value of their homes against losses that could result from housing market downturns. With the derivatives contracts introduced by the CME last year, homeowners now have some means of protection, and new and better products are more likely to follow from them.
Economic Commentary , Issue Jan

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.
Economic Commentary , Issue Feb

Journal Article
Legal systems and bank development

In some countries, banks are firms? key source of financing. In others, firms look mainly to credit markets to meet their financial needs. Why should this be so? New research suggests that a country?s legal tradition strongly influences which financial system becomes dominant there.
Economic Commentary , Issue Feb


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