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Working Paper
Preventing Controversial Catastrophes
In a market-based democracy, we model different constituencies that disagree regarding the likelihood of economic disasters. Costly public policy initiatives to reduce or eliminate disasters are assessed relative to private alternatives presented by financial markets. Demand for such public policies falls as much as 40% with disagreement, and crowding out by private insurance drives most of the reduction. As support for disaster-reducing policy jumps in periods of disasters, costly policies may be adopted only after disasters occur. In some scenarios constituencies may even demand policies ...
Working Paper
FHA, Fannie Mae, Freddie Mac, and the Great Recession
Did government mortgage programs mitigate the adverse economic effects of the financial crisis? We find that counties with greater participation in traditional government mortgage programs experienced less severe economic downturns during the Great Recession. In particular, counties with higher levels of participation in FHA, Fannie Mae, and Freddie Mac lending had relatively smaller increases in mortgage delinquency rates; smaller declines in purchase originations, home sales, home prices, and new automobile purchases; and smaller increases in unemployment rates. These results hold both in ...