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Working Paper
Debt maturity, risk, and asymmetric information
Espinosa-Vega, Marco A.; Frame, W. Scott; Miller, Nathan H.; Berger, Allen N. (2004)
We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative ...
Finance and Economics Discussion Series , Paper 2004-60

Working Paper
Federal Home Loan Bank advances and commercial bank portfolio composition
Hancock, Diana; Passmore, Wayne; Frame, W. Scott (2007)
This paper considers the role of Federal Home Loan Bank (FHLB) advances in stabilizing their commercial bank members' residential mortgage lending activities. Our theoretical model shows that using mortgage-related membership criteria or requiring mortgage-related collateral does not ensure that FHLB advances will be put to use for stabilizing members' financing of housing. Using panel vector autoregression (VAR) techniques, we estimate recent dynamic responses of U.S. bank portfolios to FHLB advance shocks, bank lending shocks, and macroeconomic shocks. Our empirical findings suggest that ...
FRB Atlanta Working Paper , Paper 2007-17

Working Paper
Why do borrowers pledge collateral? new empirical evidence on the role of asymmetric information
Espinosa-Vega, Marco A.; Frame, W. Scott; Miller, Nathan H.; Berger, Allen N. (2007)
An important theoretical literature motivates collateral as a mechanism that mitigates adverse selection, credit rationing, and other inefficiencies that arise when borrowers hold ex ante private information. There is no clear empirical evidence regarding the central implication of this literature?that a reduction in asymmetric information reduces the incidence of collateral. We exploit exogenous variation in lender information related to the adoption of an information technology that reduces ex ante private information, and compare collateral outcomes before and after adoption. Our results ...
FRB Atlanta Working Paper , Paper 2006-29

Working Paper
The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities
Adelino, Manuel; Frame, W. Scott; Gerardi, Kristopher S. (2014-04-01)
The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac?the dominant investors in subprime mortgage-backed securities before the 2008 crisis?substantively affected collateral composition in this market. Mortgages included in securities designed for the GSEs performed better than those backing other securities in the same deals, holding observable risk constant. Consistent with the transmission of private information, these effects are concentrated in low-documentation loans and for issuers that were highly dependent on the GSEs and were corporate affiliates of the mortgage ...
FRB Atlanta Working Paper , Paper 2014-4

Working Paper
Credit scoring and the availability, price, and risk of small business credit
Miller, Nathan H.; Berger, Allen N.; Frame, W. Scott (2002)
The authors examine the economic effects of small business credit scoring (SBCS) and find that it is associated with expanded quantities, higher average prices, and greater risk levels for small business credits under $100,000. These findings are consistent with a net increase in lending to relatively risky ?marginal borrowers? who would otherwise not receive credit, but who would pay relatively high prices when they are funded. The authors also find that 1) bank-specific and industrywide learning curves are important; 2) SBCS effects differ for banks that adhere to ?rules? versus ...
FRB Atlanta Working Paper , Paper 2002-6

Working Paper
The devil's in the tail: residential mortgage finance and the U.S. Treasury
White, Lawrence J.; Frame, W. Scott; Wall, Larry D. (2012)
This paper seeks to contribute to the U.S. housing finance reform conversation by providing a critical assessment of the various types of policy proposals that have been offered. There appears to be a broad consensus to maintain explicit government guarantees for certain narrowly defined borrower populations, such as Federal Housing Administration insurance guarantees for low- and moderate-income and first-time homebuyers. However, the expected role of the federal government in the broader housing finance system is in dispute. The expected role ranges from no role to insuring against only ...
FRB Atlanta Working Paper , Paper 2012-12

Working Paper
Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom
Gerardi, Kristopher S.; Frame, W. Scott; Conklin, James; Liu, Haoyang (2018-08-01)
An expansion in mortgage credit to subprime borrowers is widely believed to have been a principal driver of the 2002?06 U.S. house price boom. Contrary to this belief, we show that the house price and subprime booms occurred in different places. Counties with the largest home price appreciation between 2002 and 2006 had the largest declines in the share of purchase mortgages to subprime borrowers. We also document that the expansion in speculative mortgage products and underwriting fraud was not concentrated among subprime borrowers.
FRB Atlanta Working Paper , Paper 2018-10

Working Paper
The 2008 federal intervention to stabilize Fannie Mae and Freddie Mac
Frame, W. Scott (2009)
Fannie Mae and Freddie Mac are government-sponsored enterprises that play a central role in U.S. residential mortgage markets. In recent years, policymakers became increasingly concerned about the size and risk-taking incentives of these two institutions. In September 2008, the federal government intervened to stabilize Fannie Mae and Freddie Mac in an effort to ensure the reliability of residential mortgage finance in the wake of the subprime mortgage crisis. This paper describes the sources of financial distress at Fannie Mae and Freddie Mac, outlines the measures taken by the federal ...
FRB Atlanta Working Paper , Paper 2009-13

Conference Paper
A summary of \"Federal Home Loan Bank advances and commercial bank portfolio composition\"
Passmore, Wayne; Hancock, Diana; Frame, W. Scott (2007)
Proceedings , Paper 1057

Working Paper
The Federal Home Loan Bank System: the lender of next-to-last resort?
Bech, Morten L.; Ashcraft, Adam B.; Frame, W. Scott (2009)
The Federal Home Loan Bank (FHLB) System is a large, complex, and understudied government-sponsored liquidity facility that currently has more than $1 trillion in secured loans outstanding, mostly to commercial banks and thrifts. This paper first documents the significant role played by the FHLB System at the outset of the ongoing financial crisis and then provides evidence about the uses of these funds by their bank and thrift members. We then identify the trade-offs faced by FHLB member-borrowers when choosing between accessing the FHLB System or the Federal Reserve's discount window during ...
FRB Atlanta Working Paper , Paper 2009-04

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