Search Results
Report
The fragility of short-term secured funding markets
This paper develops a model of financial institutions that borrow short term and invest in long-term assets that can be traded in frictionless markets. Because these financial intermediaries perform maturity transformation, they are subject to potential runs. We derive distinct liquidity, collateral, and asset liquidation constraints, which determine whether a run can occur as a result of changing market expectations. We show that the extent to which borrowers can ward off an individual run depends on whether it has sufficient liquidity, collateral, and asset liquidation capacity. These ...
Report
How do stock repurchases affect bank holding company performance?
Using data from bank holding company regulatory reports, we examine the relationship between stock repurchases and financial performance for a large sample of bank holding companies over the years 1987 to 1998. The primary result is that higher levels of repurchases in one year are associated with higher profitability and a lower share of problem loans in the subsequent year. This finding is robust to several different ways of measuring share repurchase activity. Our results appear to be driven primarily by bank holding companies with publicly traded stock, especially those companies whose ...
Report
Responses to the financial crisis, treasury debt, and the impact on short-term money markets
Several programs have been introduced by U.S. fiscal and monetary authorities in response to the financial crisis. We examine the responses involving Treasury debt?the Term Securities Lending Facility (TSLF), the Supplemental Financing Program, increases in Treasury issuance, and open market operations?and their impacts on the overnight Treasury general collateral repo rate, a key money market rate. Our contribution is to consider each policy in light of the others, both to help guide policy responses to future crises and to emphasize policy interactions. Only the TSLF was designed to ...
Speech
Fixing wholesale funding to build a more stable financial system
Remarks at the New York Bankers Association's 2013 Annual Meeting & Economic Forum, The Waldorf Astoria, New York City.
Report
The tri-party repo market before the 2010 reforms
This paper provides a descriptive and quantitative account of the tri-party repo market before the reforms proposed in 2010 by the Task Force on Tri-Party Repo Infrastructure (Task Force 2010). We provide an extensive description of the mechanics of this market. We also use data from July 2008 to early 2010 to document quantitative features of the market. We find that both the level of haircuts and the amount of funding were surprisingly stable in this market. The stability of the margins is in contrast to evidence from other repo markets. Perhaps surprisingly, the data reveal relatively few ...
Speech
Reflections on the economic outlook and the implications for monetary policy
Remarks at Fordham Wall Street Council, Fordham University Graduate School of Business, New York City.
Report
Buybacks in Treasury cash and debt management
This paper examines the use of buybacks in Treasury cash and debt management. We review the mechanics and results of the buyback operations conducted in 2000-01, during a time of budget surpluses, and assess the prospective use of buybacks in the absence of a surplus. Possible future applications include (i) managing the liquidity of the new-issue markets when deficits are declining (by allowing Treasury officials to postpone a decision to discontinue a series without also being compelled to shrink new-issue sizes); (ii) actively promoting the liquidity of the new-issue markets (by ...
Journal Article
Regulation’s role in bank changes
This is the first article in a series which explores the changing role of banks in the financial intermediation process. It accompanies a Liberty Street Blog series. Both discuss the complexity of the credit intermediation chain associated with securitization and note the growing participation of nonbank entities within it. These series also discuss implications for monitoring and rulemaking going forward. In the article, the author argues that government involvement has been a significant factor in financial innovation and describes a number of the regulatory, legal, and policy decisions ...
Working Paper
Modelling Overnight RRP Participation
We examine how market participants have used the Federal Reserve?s overnight reverse repurchase (ON RRP) exercise and how short-term interest rates have evolved between December 2013 and November 2014. We show that money market fund (MMF) participation is sensitive to the spread between market repo rates and the ON RRP offering rate as well as Treasury bill issuance, government sponsored enterprise (GSE) participation is more heavily driven by calendar effects, dealers tend to only participate when rate spreads are negative, and banks generally do not participate. We also find that the effect ...