How efficient are Third District banks?
Reflections from Loretta J. Mester
I struggled with whether or not I should send out a message after the Atlanta attack. On the one hand, I believe such a heinous act requires condemnation and a public statement that I, and the institution I lead, are committed to championing diversity, equity, inclusion, and economic opportunity. It would be wrong to just look away. On the other hand, reacting only by going on record as being against atrocious acts like this feels too much like resigned acceptance that this is the way things are. Social responsibility requires us to act. The hard question is what can be done to reduce the ...
Inside the black box: what explains differences in the efficiencies of financial institutions?
Over the past several years, substantial research effort has gone into measuring the efficiency of financial institutions. Many studies have found that inefficiencies are quite large, on the order of 20 percent or more of total banking industry costs and about half of the industry's potential profits. There is no consensus on the sources of the differences in measured efficiency. This paper examines several possible sources, including differences in efficiency concept, measurement method, and a number of bank, market, and regulatory characteristics. We review the extant literature and provide ...
The Federal Reserve and Monetary Policy Communications: The Tangri Lecture, Rutgers University, New Brunswick, NJ. 01/17/2018
This afternoon I will speak about the structure of the Federal Reserve System and the value of clear monetary policy communications. I?ll summarize some of the improvements the Fed has made to its communications, and then offer my recommendation for potential next steps. Of course, my remarks will reflect my own views and not necessarily those of the Federal Reserve System or my colleagues on the Federal Open Market Committee.
Repealing Glass-Steagall: the past points the way to the future
Passed as part of the National Bank Act of 1933, the Glass-Steagall Act prohibits the mixing of commercial and investment bank activities. It was passed during a time of tumult in financial markets: the economy was in depression and there were many bank failures. Given the state of today's banking industry and the current economic climate, is it time to repeal Glass-Steagall? Congress has been debating the issue for some time. In this article, Loretta Mester weighs in with her analysis of the situation. Her conclusion? The data support repeal.
Changes in the use of electronic means of payment: 1995-2001
In "Changes in the Use of Electronic Means of Payment: 1995-2001," Mester updates tables that first appeared in her article in the March/April 2000 Business Review. The tables are based on data from the 2001 Survey of Consumer Finances. ; Also issued as Payment Cards Center Discussion Paper No. 03-16
Payments and the Pandemic
It is a great pleasure being with you today as part of the 20th Anniversary Chicago Payments Symposium. Over the last two decades, this symposium has established itself as a valuable forum at which those interested in the payments system can gather to learn and share ideas. In recent years, the symposium has fostered important conversations between industry practitioners and policymakers. Those conversations have helped inform the Federal Reserve System’s initiative to improve and modernize the U.S. payments system. That work is ongoing and has reached important milestones this year, ...
Is Bigger Necessarily Better in Community Banking?
We investigate the relative performance of publicly traded community banks (those with assets less than $10 billion) versus larger banks (those with assets between $10 billion and $50 billion). A body of research has shown that community banks have potential advantages in relationship lending compared with large banks, although newer research suggests that these advantages may be shrinking. In addition, the burdens placed on community banks by the regulatory reforms mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the need to increase investment in technology, ...
Competitive effects of Basel II on U.S. bank credit card lending
The authors analyze the potential competitive effects of the proposed Basel II capital regulations on U.S. bank credit card lending. They find that bank issuers operating under Basel II will face higher regulatory capital minimums than Basel I banks, with differences due to the way the two regulations treat reserves and gain-on-sale of securitized assets. During periods of normal economic conditions, this is not likely to have a competitive effect; however, during periods of substantial stress in credit card portfolios, Basel II banks could face a significant competitive disadvantage relative ...
The Outlook for the Economy and Monetary Policy; 02.13.19; University of Kentucky Gatton College of Business and Economics, 2019 Economic Outlook Conference, Lexington, KY
The Cleveland Fed is one of 12 regional Reserve Banks distributed across the country that, along with the Board of Governors in Washington, D.C., comprise the Federal Reserve System. This regional structure helps us to collect information from around the country so that our monetary policy decisions can take into account the diversity of the American economy and its people. I am very grateful for the many contacts throughout our District who generously share with us their insights into business activity, labor markets, and financial conditions. This timely information is collected through our ...