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Discussion Paper
Tracking the U.S. Banking Industry
Vickery, James; Avraham, Dafna; Sullivan, Tara (2012-10-10)
The New York Fed has recently published the first edition of a new quarterly report tracking the aggregate financial condition of consolidated U.S. banking organizations. In this post, we describe the methodology used to construct the statistics in the report as well as present and briefly discuss some of the findings.
Liberty Street Economics , Paper 20121010

Report
Patterns of rainfall insurance participation in rural India
Gine, Xavier; Townsend, Robert M.; Vickery, James (2007)
This paper describes the contract design and institutional features of an innovative rainfall insurance policy offered to smallholder farmers in rural India and presents preliminary evidence on the determinants of insurance participation. Insurance take-up is found to be decreasing in basis risk between insurance payouts and income fluctuations, higher among wealthy households, and lower among households that are credit constrained. These results match predictions of a simple neoclassical model appended with borrowing constraints. Other patterns are less consistent with the benchmark model. ...
Staff Reports , Paper 302

Report
A sampling-window approach to transactions-based Libor fixing
Vickery, James; Duffie, Darrell; Skeie, David R. (2013)
We examine the properties of a method for fixing Libor rates that is based on transactions data and multi-day sampling windows. The use of a sampling window may mitigate problems caused by thin transaction volumes in unsecured wholesale term funding markets. Using two partial data sets of loan transactions, we estimate how the use of different sampling windows could affect the statistical properties of Libor fixings at various maturities. Our methodology, which is based on a multiplicative estimate of sampling noise that avoids the need for interest rate data, uses only the timing and sizes ...
Staff Reports , Paper 596

Report
Credit risk transfer and de facto GSE reform
Strzodka, Andreas; Vickery, James; Finkelstein, David (2018-02-01)
We summarize and evaluate Fannie Mae and Freddie Mac?s credit risk transfer (CRT) programs, which have been used since 2013 to shift a portion of credit risk on more than $1.8 trillion of mortgages to private sector investors. We argue that the CRT programs have been successful in reducing the exposure of the federal government to mortgage credit risk without disrupting the liquidity or stability of mortgage secondary markets. In the process, the programs have created a new financial market for pricing and trading mortgage credit risk, which has grown in size and liquidity over time. The CRT ...
Staff Reports , Paper 838

Journal Article
The Pandemic Mortgage Boom
Newton, Natalie; Vickery, James (2022-11-10)
We learn a lot about the mortgage market by understanding why it defied expectations during the pandemic
Economic Insights , Volume 7 , Issue 3 , Pages 18-24

Report
Identifying term interbank loans from Fedwire payments data
Kuo, Dennis; Skeie, David R.; Vickery, James; Youle, Thomas (2013)
Interbank markets for term maturities experienced great stress during the 2007-09 financial crisis, as illustrated by the behavior of the one- and three-month Libor. Despite widespread interest in these markets, little data is available on dollar interbank lending for maturities beyond overnight. We develop a methodology to infer information about individual term dollar interbank loans settled through the Fedwire Funds Service, the large-value bank payment system operated by the Federal Reserve Banks. We find a sharp increase in the dispersion of inferred term interbank interest rates, a ...
Staff Reports , Paper 603

Journal Article
TBA trading and liquidity in the agency MBS market
Wright, Joshua; Vickery, James (2013-05)
Mortgage-backed securities in the United States are generally traded on a ?to-be-announced,? or TBA, basis. The key feature of a TBA trade is that the identity of the securities to be delivered to the buyer is not specified exactly at the time of the trade, facilitating a liquid forward market. This article describes the main features of the TBA market. It also presents evidence on the liquidity of this market during the financial crisis period. Using variation in TBA eligibility rules, the authors? estimates suggest that the liquidity benefits associated with the TBA market are of the order ...
Economic Policy Review , Volume 19 , Issue May , Pages 1-18

Report
Defragmenting Markets: Evidence from Agency MBS
Vickery, James; Liu, Haoyang; Song, Zhaogang (2021-05-01)
Agency mortgage-backed securities (MBS) issued by Fannie Mae and Freddie Mac have historically traded in separate forward markets. We study the consequences of this fragmentation, showing that market liquidity endogenously concentrated in Fannie Mae MBS, leading to higher issuance and trading volume, lower transaction costs, higher security prices, and a lower primary market cost of capital for Fannie Mae. We then analyze a change in market design—the Single Security Initiative—which consolidated Fannie Mae and Freddie Mac MBS trading into a single market in June 2019. We find that ...
Staff Reports , Paper 965

Report
Assessing financial stability: the Capital and Loss Assessment under Stress Scenarios (CLASS) model
Hirtle, Beverly; Kovner, Anna; Bhanot, Meru; Vickery, James (2014-02-01)
The CLASS model is a top-down capital stress testing framework that uses public data, simple econometric models, and auxiliary assumptions to project the effect of macroeconomic scenarios on U.S. banking firms. Through the lens of the model, we find that the total banking system capital shortfall under stressful macroeconomic conditions began to rise four years before the financial crisis, peaking in the fourth quarter of 2008. The capital gap has since fallen sharply, and is now significantly below pre-crisis levels. In the cross section, banking firms estimated to be most sensitive to ...
Staff Reports , Paper 663

Report
Intermediation Frictions in Debt Relief: Evidence from CARES Act Forbearance
Kim, You Suk; Lee, Donghoon; Scharlemann, Tess C.; Vickery, James (2022-10-01)
We study how intermediaries—mortgage servicers—shaped the implementation of mortgage forbearance during the COVID-19 pandemic and use servicer-level variation to trace out the causal effect of forbearance on borrowers. Forbearance provision varied widely across servicers. Small servicers and nonbanks, especially nonbanks with small liquidity buffers, facilitated fewer forbearances and saw a higher incidence of forbearance-related complaints. Easier access to forbearance substantially increased mortgage nonpayment but also reduced delinquencies outside of forbearance. Part of the liquidity ...
Staff Reports , Paper 1035

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