Search Results
Briefing
How Secondary Trade Affects Social Welfare in an Over-the-Counter Market
Over-the-counter markets with secondary trade and an unfixed quantity of assets suffer from inefficiency stemming from a double-sided hold-up problem between consumers and intermediaries.The inefficiency cannot be resolved through bargaining power alone, since efficiency would require both intermediaries and consumers to have full bargaining power.A budget neutral tax/subsidy scheme could resolve this inefficiency and increase social welfare by up to 13.3 percent.
Briefing
Bank Failures: Solvency and Liquidity
Bank failures are almost always preceded by weak fundamentals: bad loans, low capital and/or declining earnings. Meanwhile, depositor panics, while dramatic, are rarely the root cause.Low recovery rates on failed banks' assets and examiners' postmortem assessments both point to deep insolvency, even in banks that experienced runs before failing.Deposit insurance and emergency lending alone cannot prevent crises. Policies that ensure adequate bank capital and sound risk management are essential.
Briefing
How Bank Lending Standards Shape the U.S. Macroeconomy
Changes in lending standards affect GDP performance, with changes to business lending standards having a greater impact on overall U.S. economic growth than changes to household lending standards.The tightening of business lending standards is associated with a significant and persistent drop in real GDP growth. The magnitude of the effect depends on economic conditions, as it is significantly stronger when GDP is below its long-run trend, interest rates are away from their effective lower bound or economic uncertainty is elevated.A tightening of bank lending standards has a larger, more ...
Journal Article
Interview: Carmen Reinhart
Carmen Reinhart is a leading authority on financial crises in both advanced and emerging economies thanks to timely and groundbreaking research like her acclaimed 2009 book, This Time is Different: Eight Centuries of Financial Folly, with frequent co-author and fellow Harvard University economist Kenneth Rogoff. Yet despite the influence she has had on the profession, she wasn't drawn to economics until later in life.
Journal Article
Features: Fighting Payments Fraud
For many people, TikTok has become their go-to source for information on everything from fashion to food to home maintenance. Gone are the days of having to figure it out yourself or "Google it"; influencers now post short videos detailing how to perform any number of supposed "life hacks" meant to make life a little easier or, at the very least, more entertaining. In the past year, one more hack joined the list: check fraud. The hack went viral in the fall of 2024, and it was surprisingly easy: Chase Bank customers wrote checks of significant amounts to themselves, deposited those checks ...
Journal Article
Why Banks Fail
Why do banks fail? One popular view emphasizes the role of bank runs, when a bank's customers collectively withdraw their money on the belief that the bank will soon fail. Bank runs, according to this view, can cause otherwise healthy banks to fail — the panic itself creates a self-fulfilling prophecy. This is often cited as an important cause of bank failures during the Great Depression, the 2008 financial crisis, and the 2023 U.S. banking crisis. A recent paper, however, casts serious doubt on this narrative.
Journal Article
Economic History: The Bank of North America
John Trumbull's "Surrender of Lord Cornwallis" is one of eight paintings depicting significant moments in American history hanging in the Capitol rotunda in Washington, D.C. It portrays the Oct. 19, 1781, surrender of British troops at Yorktown, Va., after the final battle of the Revolutionary War. While the foreground holds the action, the background is dominated by billowing black smoke from the charred, war-ravaged landscape. It's hard to know if Trumbull intended any deeper meaning, but there's no denying that the war's destruction clouded the future of the newly independent United States.
Journal Article
Federal Reserve: Reserve Bank Boards of Directors
The boards of directors of the 12 Federal Reserve Banks are not typical boards. To be sure, they carry out many of the usual responsibilities of corporate governance, such as approving a strategic plan and monitoring operations, auditing and risk, human resources, executive compensation, and the like. But unlike private sector boards that are primarily concerned with firms' financial health and growth projections, Fed directors are also charged with a much broader task that makes them not just unique among institutional boards, but within American society at large: assisting in the ...
Discussion Paper
Early Results: The Federal Reserve's 2025 CDFI Survey
This spring, we fielded the 2025 Community Development Financial Institution (CDFI) Survey. The survey provides policymakers and community development stakeholders with information about how CDFIs are faring as they work to close gaps in credit and capital access. We heard from 448 institutions during the survey fielding period from April 10 to June 13, which accounts for nearly 30 percent of all certified CDFIs in the country. CDFIs shared their experiences in the following areas:Goals for scaling their operationsDemand for productsChallenges in meeting demandPublic programs that have ...
Discussion Paper
CDFI Survey Results Over Time
This spring, the Richmond Fed led efforts to collect data on community development financial institutions (CDFIs) through the 2025 Federal Reserve CDFI Survey. In general, this year's survey respondents reported relatively strong demand for CDFIs' products, noted the importance of federal funding for their organizations, cited staffing and technological challenges, and expressed hopes to expand in the future.Since 2019, the Federal Reserve CDFI Survey has been conducted every two years (with the exception of a special COVID-19 CDFI Survey in 2020). Understanding the current industry landscape ...