Bank Asset Concentration Not Necessarily Cause for Worry
U.S. banking assets have become substantially more concentrated within a few large institutions. However, decreasing relative rates of big-bank growth and of idiosyncratic volatility?an indicator of individual bank susceptibility to shocks and a resulting redistribution of assets?suggest a reduction in systemic financial system risk through contagion.
Regulatory Burden Rising
U.S. commercial banks face growing regulatory requirements and complexity, especially with the Dodd?Frank Wall Street Reform and Consumer Protection Act of 2010, which was intended to rein in excesses of the largest banks. The nation would be better served by a regulatory framework that more fully accounts for the operational differences between small and large banks.
Dallas Fed Mobility and Engagement Index Gives Insight into COVID-19’s Economic Impact
To gain insight into the economic impact of the pandemic, we developed an index of mobility and engagement, based on geolocation data collected from a large sample of mobile devices.
Liquidity mismatch helps predict bank failure and distress
Liquidity mismatch?the risk of a bank being unable to fund increases in assets or meet its obligations as they come due?increased in the U.S. banking sector during the run-up to the financial crisis, especially at the largest institutions, contributing to bank failure and distress.
Payments Crises and Consequences
Banking-system shutdowns during contractions scar economies. Four times in the lastforty years, governors suspended payments from state-insured depository institutions. Suspensionsof payments in Nebraska (1983), Ohio (1985), and Maryland (1985), which wereshort and occurred during expansions, had little measurable impact on macroeconomic aggregates.Rhode Island’s payments crisis (1991), which was prolonged and occurred duringa recession, lengthened and deepened the downturn. Unemployment increased. Outputdeclined, possibly permanently relative to what might have been. We document these ...
In Uncertain Times, Fed Sometimes Turns to ‘Insurance’
In June 2019, a concept appeared in the Federal Open Market Committee (FOMC) minutes that had not shown up in FOMC minutes for 11 years—the idea of monetary policy “insurance.”
Impact of Macroeconomic Surprises Changed After Zero Lower Bound
Macroeconomic surprises involving employment and inflation?reflecting the Fed?s attempts to achieve its dual mandate to promote full employment and price stability?increased in importance during the zero-lower-bound period. Also, market participants were more attentive to housing market indicators and final GDP revisions.
Why does the FDIC sue?
Cases the Federal Deposit Insurance Corporation (FDIC) pursues against the directors and officers of failed commercial banks for (gross) negligence are important for the corporate governance of U.S. commercial banks. These cases shape the kernel of bank corporate governance, as they guide expectations of bankers and regulators in defining the limits of acceptable behavior under financial distress. We examine the differences in behavior of all 408 U.S. commercial banks that were taken into receivership between 2007?2012. Sued banks had different balance sheet dynamics in the three years prior ...
Why are big banks getting bigger?
The U.S. banking sector has become substantially more concentrated since the 1990s, raising questions about both the causes and implications of this consolidation. We address these questions using nonparametric empirical methods that characterize dynamic power law distributions in terms of two shaping factors ? the reversion rates (a measure of crosssectional mean reversion) and idiosyncratic volatilities of assets for different size-ranked banks. Using quarterly data for subsidiary commercial banks and thrifts and their parent bank-holding companies, we show that the greater concentration of ...
Heterogeneous bank lending responses to monetary policy: new evidence from a real-time identification
We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending, at both the bank and U.S. state levels. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much stronger dynamic effects and greater heterogeneity in U.S. bank lending responses than that found in previous research based on realized federal funds rate changes. Our findings suggest that studies using realized monetary policy changes confound monetary policy?s effects with those of changes in expected ...