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Discussion Paper
The Federal Reserve's Liquidity Backstops to the Municipal Bond Market during the COVID-19 Pandemic
Wei, Bin; Yue, Vivian Z. (2020-05-28)
The COVID-19 pandemic has caused tremendous hardship all over the world. In response, the Federal Reserve has moved quickly and aggressively to support the economy in the United States. In this article, we present some initial evidence for the effectiveness of some of the facilities in calming the municipal bond market, particularly the short-term variable-rate demand obligation (VRDO) market. We discuss the important role of liquidity backstops in mitigating runs and stabilizing financial markets in general based on insights from our study on the runs on VRDO and auction-rate securities ...
Policy Hub* , Paper 2020-5

Discussion Paper
Financial Stability and the Coronavirus Pandemic
Wall, Larry D. (2020-11-30)
The Atlanta Fed recently helped organize a conference titled "Financial Stability and the Coronavirus Pandemic." The conference had three sessions devoted to problems focusing on various aspects of how the markets for corporate credits responded to the COVID-19 shock including corporate bond investment funds, the corporate bond market, and the corporate loan market. This article summarizes some of the important findings of the papers presented at the conference.
Policy Hub* , Paper 2020-13

Discussion Paper
Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19
Lambie-Hanson, Lauren; Gerardi, Kristopher; Willen, Paul S. (2021-06-22)
The COVID-19 pandemic was characterized by both high refinancing volumes and high rates of mortgage nonpayment. Refinancing activity differed significantly across racial and ethnic groups, and we show that the benefits from the lower interest rate environment were not shared equally. Compared to white borrowers, Black and Hispanic mortgage borrowers experienced higher rates of nonpayment, which reflected both a greater transition into nonpayment status for Black and Hispanic borrowers and a lower likelihood of resuming payments. However, strong house price appreciation in recent years, ...
Policy Hub* , Paper 2021-06

Journal Article
Fiat-Backed Stablecoins and Narrow Banking
Shy, Oz (2026-03-31)
Devastated by the misery of millions of people during the Great Depression caused by the collapse of the entire US financial system, a group of economists at the University of Chicago sought to reform the banking sector. The "Chicago plan" suggested a replacement of "fractional-reserve banks" with "full-reserve banks" (also called "narrow banks" and "limited-purpose banks"). Most economists dismiss this idea. However, the rising popularity of stablecoins and the 2025 GENIUS Act in the US introduce this form of banking to the general public. The goal of this note is to analyze the similarities ...
Policy Hub , Volume 2026 , Issue 2 , Pages 12

Journal Article
So Far, So Good: Government Insurance of Financial Sector Tail Risk
Wall, Larry D. (2021-11-08)
The US government has intervened to provide extraordinary support 16 times from 1970 to 2020 with the goal of preventing or mitigating (or both) the cost of financial instability to the financial sector and the real economy. This article discusses the motivation for such support, reviewing the instances where support was provided, along with one case where it was expected but not provided. The article then discusses the moral hazard and fiscal risks posed by the government's insurance of the tail risk along with ways to reduce the government's risk exposure.
Policy Hub , Volume 2021 , Issue 13

Journal Article
Lessons Learned from Mortgage Borrower Policies and Outcomes during the COVID-19 Pandemic
Lambie-Hanson, Lauren; Gerardi, Kristopher; Willen, Paul S. (2022-07-07)
This article evaluates how the most important policy responses to the COVID-19 pandemic affected the US mortgage market. In particular, we consider the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020; the follow-on American Rescue Plan (ARP) Act of 2021, which extended many of the provisions in the CARES Act; and the Federal Reserve's large-scale asset purchase (LSAP) program that was announced in March 2020. Our analysis considers both the aggregate effects and the distributional effects of these policies on mortgage borrowers. Overall, we find that pandemic-era ...
Policy Hub , Volume 2022 , Issue 9

Journal Article
Do Credit Supply Shocks Constrain Employment Growth of Small and Medium-Sized Enterprises?
Willis, Jonathan L.; Baslandze, Salomé; Minoiu, Camelia; Penciakova, Veronika (2023-09-25)
Small and medium-sized enterprises (SMEs) made outsized contributions to net employment growth during the pandemic recession and recovery. However, credit conditions have tightened significantly during the past year and might hinder growth for small firms going forward. Using data on bank lending to small businesses and employment growth, we estimate that a tightening in bank credit supply of 1 percentage point is associated with an 11 percent decline in SMEs' net job creation rate. This estimate indicates that a bank credit tightening about one-third the size of the tightening observed ...
Policy Hub , Volume 2023 , Issue 5

Journal Article
The Impact of the Pandemic on US Businesses: New Results from the Annual Business Survey
Meyer, Brent; Schweitzer, Mark E. (2022-03-22)
Working with Federal Reserve staff, the US Census Bureau added to the 2021 Annual Business Survey (ABS) a special module of questions focused on the pandemic and small business finances. Questions ranged from the impact of the pandemic on business sales, to government assistance requested/received, and to the financial health of the firm. In this article, we report the results of these questions—and how they differ by race and ethnicity. The survey finds that more than 60 percent of business experienced declines in sales. Fully one-third experienced significant declines. More than 70 ...
Policy Hub , Volume 2022 , Issue 3 , Pages 13

Journal Article
Financial Stability and the Coronavirus Pandemic
Wall, Larry D. (2020-11-30)
The Atlanta Fed recently helped organize a conference titled “Financial Stability and the Coronavirus Pandemic.” The conference had three sessions devoted to problems focusing on various aspects of how the markets for credits responded to the COVID-19 shock including corporate bond investment funds, the corporate bond market, and the corporate loan market. This article summarizes some of the important findings of the papers presented at the conference.
Policy Hub , Volume 2020 , Issue 13 , Pages 8

Journal Article
The Federal Reserve's Liquidity Backstops to the Municipal Bond Market during the COVID-19 Pandemic
Wei, Bin; Yue, Vivian Z. (2020-05-28)
The COVID-19 pandemic has caused tremendous hardship all over the world. In response, the Federal Reserve has moved quickly and aggressively to support the economy in the United States. In this article, we present some initial evidence for the effectiveness of some of the facilities in calming the municipal bond market, particularly the short-term variable-rate demand obligation (VRDO) market. We discuss the important role of liquidity backstops in mitigating runs and stabilizing financial markets in general based on insights from our study on the runs on VRDO and auction-rate securities ...
Policy Hub , Volume 2020 , Issue 5 , Pages 10

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