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Journal Article
Two Years into COVID, What’s the State of U.S. Businesses?
Paul, Pascal (2022-08-15)
More than two years after the outbreak of COVID-19, concerns remain that U.S. businesses are substantially more vulnerable and less productive than in the past. Using extensive data on private and public firms allows for a detailed assessment of these concerns. According to a number of performance measures, businesses borrowing from large U.S. banks appear relatively healthy, increased leverage is concentrated among safer companies rather than riskier ones, and probabilities of default are close to pre-crisis levels.
FRBSF Economic Letter , Volume 2022 , Issue 22 , Pages 6

Speech
Opening remarks at the Convening on Student Loan Data Conference
Dudley, William (2015-03-04)
Remarks at the Convening on Student Loan Data Conference, Federal Reserve Bank of New York, New York City.
Speech , Paper 158

Working Paper
The Persistence of Financial Distress
Sanchez, Juan M.; Athreya, Kartik B.; Mustre-del-Rio, Jose (2017-11-09)
Using recently available proprietary panel data, we show that while many (35%) US consumers experience financial distress at some point in the life cycle, most of the events of financial distress are primarily concentrated in a much smaller proportion of consumers in persistent trouble. Roughly 10% of consumers are distressed for more than a quarter of the life cycle, and less than 10% of borrowers account for half of all distress events. These facts can be largely accounted for in a straightforward extension of a workhorse model of defaultable debt that accommodates a simple form of ...
Working Paper , Paper 17-14

Report
Endogenous Leverage and Default in the Laboratory
Houser, Daniel; Fostel, Ana; Cipriani, Marco (2019-11-01)
We study default and endogenous leverage in the laboratory. To this purpose, we develop a general equilibrium model of collateralized borrowing amenable to laboratory implementation and gather experimental data. In the model, leverage is endogenous: agents choose how much to borrow using a risky asset as collateral, and there are no ad hoc collateral constraints. When the risky asset is financial?namely, its payoff does not depend on ownership (such as a bond)? collateral requirements are high and there is no default. In contrast, when the risky asset is nonfinancial?namely, its payoff ...
Staff Reports , Paper 900

Working Paper
Debtor Fraud in Consumer Debt Renegotiation
Mikhed, Slava; Raina, Sahil; Scholnick, Barry; Zhang, Man (2022-10-26)
We study how forcing financially distressed consumer debtors to repay a larger fraction of debt can lead them to misreport data fraudulently. Using a plausibly exogenous policy change that required debtors to increase repayment to creditors, we document that debtors manipulated data to avoid higher repayment. Consistent with deliberate fraud, data manipulators traveled farther to find more lenient insolvency professionals who, historically, approved more potentially fraudulent filings. Finally, we find that those debtors who misreported income had a lower probability of default on their debt ...
Working Papers , Paper 22-35

Working Paper
Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default
Gerardi, Kristopher; Ohanian, Lee E.; Willen, Paul S.; Herkenhoff, Kyle F. (2013-08-01)
This paper exploits matched data from the PSID on borrower mortgages with income and demographic data to quantify the relative importance of negative equity, versus lack of ability to pay, as affecting default between 2009 and 2013. These data allow us to construct household budgets sets that provide better measures of ability to pay. We use instrumental variables to quantify the impact of ability to pay, including job loss and disability, versus negative equity. Changes in ability to pay have the largest estimated effects. Job loss has an equivalent effect on default likelihood as a 35 ...
FRB Atlanta Working Paper , Paper 2013-04

Working Paper
The Mortgage Prepayment Decision: Are There Other Motivations Beyond Refinance and Move?
Maingi, Ramain Quinn; Hall, Arden (2019-10-21)
Borrowers terminate residential mortgages for a variety of reasons. Prepayments and defaults have always been distinguishable, and researchers have recently distinguished between prepayments involving a move and other prepayments. But these categories still combine distinct decisions. For example, a borrower may refinance to obtain a lower interest rate or to borrow a larger amount. By matching mortgage servicing and credit bureau records, we are able to distinguish among several motivations for prepayment: simple refinancing, cash-out refinancing, mortgage payoff, and move. Using multinomial ...
Working Papers , Paper 19-39

Working Paper
Mortgage Prepayment, Race, and Monetary Policy
Gerardi, Kristopher S.; Willen, Paul S.; Zhang, David Hao (2020-09-01)
This paper documents large differences in mortgage prepayment behavior across racial and ethnic groups in the United States, which have significant implications for monetary policy, inequality, and pricing. Using a novel data set that combines administrative data on mortgage performance with information on race and ethnicity, we show that Black and Hispanic white borrowers have significantly lower prepayment rates compared with Non-Hispanic white borrowers, holding income, credit score, and equity constant. This gap is on the order of 50 percent and largely reflects different sensitivities ...
Working Papers , Paper 20-7

Discussion Paper
How Large are Default Spillovers in the U.S. Financial System?
Duarte, Fernando M.; Jones, Collin; Ruela, Francisco (2019-06-26)
When a financial firm defaults on its counterparties, the counterparties may in turn become unable to pay their own creditors, and so on. This domino effect can quickly propagate through the financial system, creating undesirable spillovers and unnecessary defaults. In this post, the authors use the framework discussed in the first post of this two-part series to answer the question: How vulnerable is the U.S. financial system to default spillovers?
Liberty Street Economics , Paper 20190626

Working Paper
Policy Rules and Large Crises in Emerging Markets
Espino, Emilio; Sanchez, Juan M.; Martin, Fernando M.; Kozlowski, Julian (2023-05-25)
Emerging countries have increasingly adopted rules to discipline government policy. The COVID-19 shock lead to widespread suspension and modification of these rules. We study rules and flexibility in a sovereign default model with domestic fiscal and monetary policies and long-term external debt. We find welfare gains from adopting monetary targets and debt limits during normal times. Though government policy cannot itself counteract fundamental shocks hitting the economy, the adoption of rules has a significant impact on policy, macroeconomic outcomes and welfare during large, unexpected ...
Working Papers , Paper 2022-018

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