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Fed’s Mortgage-Backed Securities Purchases Sought Calm, Accommodation During Pandemic
Frame, W. Scott; Greene, Brian; Hull, Cindy E.; Zorsky, Josh (2021-08-26)
We explore the Federal Reserve’s purchases of agency MBS—mortgage bonds guaranteed by Ginnie Mae, Fannie Mae and Freddie Mac—and related market dynamics during the pandemic, including why mortgage rates fell to historic lows.
Dallas Fed Economics

Working Paper
A Tale of Two Bailouts: Effects of TARP and PPP on Subprime Consumer Debt
Berger, Allen N.; Roman, Raluca; Epouhe, Onesime (2021-09-23)
High levels of subprime consumer debt can create social problems. We test the effects of the Troubled Asset Relief Program (TARP) and Paycheck Protection Program (PPP) bailouts during the Global Financial Crisis and COVID-19 crisis, respectively, on this debt. We use over 11 million credit bureau observations of individual consumer debt combined with banking, bailout, and local market data. We find that subprime consumers with more TARP institutions in their markets had significantly increased debt burdens following these bailouts. In contrast, PPP bailouts were associated with reduced ...
Working Papers , Paper 21-32

Journal Article
Bank Profitability Rebounds despite Compressed Interest Margins
Sengupta, Rajdeep; Byrdak, Adam (2021-11-17)
While traditional sources of U.S. bank revenues have struggled during the pandemic, overall bank profitability has soared. This unusual deviation is largely explained by a substantial decline in banks’ loan loss provisions. Extraordinary policy measures undertaken by the Federal Reserve and U.S. Treasury aided a rebound in financial market conditions and, in turn, reduced projected loan losses. However, this effect is likely to be transitory, suggesting an uncertain future for bank profitability.
Economic Bulletin , Issue November 17, 2021

Working Paper
Bank Fees, Aftermarkets, and Consumer Behavior
Adams, Robert M. (2017-05)
Fees for banking services have been a policy concern for over 20 years and the subject of several government agencies studies, which focused on the magnitude, incidence, or disclosure of such fees. Using a sample of single market banks, I study the relationship between market-level consumer characteristics and bank fee revenue, fees, and bank return on assets (ROA) to infer consumer and firm behavior. Of particular interest, I use county-level IRS tax records as a measure of the consumer income distribution, but my analysis also includes measures of age and education distributions. I find ...
Finance and Economics Discussion Series , Paper 2017-054

Working Paper
The Effect of Common Ownership on Profits : Evidence From the U.S. Banking Industry
Gramlich, Jacob P.; Grundl, Serafin J. (2018-10-03)
Theory predicts that "common ownership" (ownership of rivals by a common shareholder) can be anticompetitive because it reduces the weight firms place on their own profits and shifts weight toward rival firms held by common shareholders. In this paper we use accounting data from the banking industry to examine empirically whether shifts in the profit weights are associated with shifts in profits. We present the distribution of a wide range of estimates that vary the specification, sample restrictions, and assumptions used to calculate the profit weights. The distribution of estimates is ...
Finance and Economics Discussion Series , Paper 2018-069

Working Paper
The Welfare Effects of Bank Liquidity and Capital Requirements
Van den Heuvel, Skander J. (2022-11-04)
The stringency of bank liquidity and capital requirements should depend on their social costs and benefits. This paper investigates their welfare effects and quantifies their welfare costs using sufficient statistics. The special role of banks as liquidity providers is embedded in an otherwise standard general equilibrium growth model. Capital and liquidity requirements mitigate moral hazard from deposit insurance, which, if unchecked, can lead to excessive credit and liquidity risk at banks. However, these regulations are also costly because they reduce the ability of banks to create net ...
Finance and Economics Discussion Series , Paper 2022-072

Working Paper
Community Bank Performance: How Important are Managers?
Prager, Robin A.; Amel, Dean F. (2014-03-18)
Community banks have long played an important role in the U.S. economy, providing loans and other financial services to households and small businesses within their local markets. In recent years, technological and legal developments, as well as changes in the business strategies of larger banks and non-bank financial service providers, have purportedly made it more difficult for community banks to attract and retain customers, and hence to survive. Indeed, the number of community banks and the shares of bank branches, deposits, banking assets, and small business loans held by community banks ...
Finance and Economics Discussion Series , Paper 2014-26

Life Insurers’ Preference for Familiar Bond Issuers Limits COVID-19 Shock Transmission
Almeida, Alex; Barbosa, Monica; Ozdagli, Ali K. (2021-10-05)
Despite regulations that encourage diversification and informational symmetry among buyers, insurance companies tend to lend to their current borrowers. This bondholder–issuer relationship moderates the effect of transitory economic shocks such as those associated with the onset of COVID-19.
Dallas Fed Economics

Fed Releases Proposal for CRA Reform, Seeks Comments
White, Carl (2020-10-29)
The Fed and the OCC have both issued proposals for reforming CRA regulations. How do they differ?
On the Economy

Bank Supervision Adapts to Pandemic Challenges
White, Carl (2020-08-10)
Communication between bank management and bank supervisors will remain vital to understanding the challenges banks are facing.
On the Economy

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