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Author:Haubrich, Joseph G. 

Working Paper
Causal Impact of Risk Oversight Functions on Bank Risk: Evidence from a Natural Experiment

Our goal is to document the causal impact of having a board-level risk committee (RC) and a management-level executive designated as chief risk officer (CRO) on bank risk. The Dodd Frank Act requires bank holding companies with over $10 billion of assets to have an RC, while those with over $50 billion of assets are additionally required to have a CRO to oversee risk management. The innovation that allows us to document a causal impact is our research design. First, we use the passage of the Dodd Frank Act as a natural experiment that forced noncompliant firms to adopt an RC and appoint a ...
Working Papers , Paper 19-01

Journal Article
Bank diversification: laws and fallacies of large numbers

Conventional wisdom on bank diversification confuses risk with failure. This article clarifies the distinction and shows how increasing bank size may increase bank risk, even though it lessens the probability of failure and lowers the expected loss. The key result is an application of Samuelson's "fallacy of large numbers."
Economic Review , Volume 34 , Issue Q II , Pages 2-9

Working Paper
How Cyclical Is Bank Capital?

The alleged pro-cyclicality of bank capital (high in good times, low in bad) has received some blame for the recent financial crisis. Others blame the countercyclicality of capital regulations: too low in high times and too high in bad. To address this problem, Basel III has introduced countercyclical capital buffers for large banks. But just how cyclical is bank capital? We look at the question from several vantage points, using both detailed recent data on risk-weighted assets and several sources of annual data going back to 1834. To help understand the historical data, we provide a short ...
Working Papers (Old Series) , Paper 1504

Journal Article
Risk management and financial crises

Some financial failures occur when people don't understand the risks they take. Others are simply bad luck. But the most important cases happen when private risks have an extra social aspect.
Economic Commentary , Issue Feb

Working Paper
The yield curve, recessions, and the credibility of the monetary regime: long-run evidence, 1875-1997

This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875-1997. This predictability varies over time, however, particularly across different monetary regimes. In accord with our proposed theory, regimes with low credibility (high persistence of inflation) tend to have better predictability.
Working Papers (Old Series) , Paper 0402

Working Paper
Imperfect state verification and financial contracting

An argument that in a costly state verification model of financial contracting, relaxing the assumption of perfect verification makes the measurement of information difficult.
Working Papers (Old Series) , Paper 9506

Journal Article
Interest rates, yield curves, and the monetary regime

The yield curve has a wealth of information about future interest rates and economic conditions. Users should exercise caution, though, as many of the relationships that hold between the behavior of the curve and what it foretells depend on the monetary regime in place at the time the curve is drawn.
Economic Commentary , Issue Jun

Working Paper
Sharing with a risk-neutral agent

A study that demonstrates multiple equilibria in a class of principal-agent models and that examines the convergence properties of contracts as risk aversion approaches zero.
Working Papers (Old Series) , Paper 9301

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