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Discussion Paper
Fear of $10 Billion
Ten billion has become a big number in banking since the Dodd-Frank Act of 2010. When banks’ assets exceed that threshold, they face considerably heightened supervision and regulation, including exams by the Consumer Financial Protection Bureau, caps on interchange fees, and annual stress tests. There are plenty of anecdotes about banks avoiding the $10 billion threshold or waiting to cross with a big merger, but we’ve seen no systematic evidence of this avoidance behavior. We provide some supporting evidence below and then discuss the implications for size-based bank regulation—where ...
Discussion Paper
The Adverse Effect of “Mandatory” Flood Insurance on Access to Credit
The National Flood Insurance Program (NFIP) was designed to reduce household and lender flood-risk exposure and encourage lending. In this post, which is based on our related study, we show that in certain situations the program actually limits access to credit, particularly for low-income borrowers—an unintended consequence of this well-intentioned program.
Report
Unintended Consequences of "Mandatory" Flood Insurance
We show that the National Flood Insurance Program inadvertently concentrated flood risk among households least able to bear it. Using nationwide flood map data, HMDA records, and credit panel data, we show: (i) insurance mandates reduce mortgage lending, particularly for low-income applicants, (ii) these households disproportionately sort into areas immediately adjacent to flood zones, where credit is still available to them but actual flood risk remains, (iii) following disasters, households in these areas experience sharp increases in debt and delinquency rates. Our results show that binary ...