Bank capital regulation and secondary markets for bank assets
The paper derives optimal capital requirements, when the bank?s quality is private information. The supervisor can inspect the bank and punish the undercapitalized one with recapitalization and downsizing. The cost of bank?s capital and its ability to sell its assets are crucial for the bank?s incentive to reveal its quality truthfully. The paper provides following policy implications. First, sensitivity of capital requirements to the bank?s quality should be low in good times and high in bad times. Second, a leverage ratio should be accompanied by a requirement that the bank selling its assets retains part of them. Third, using results from supervisory inspection on the secondary market for the bank?s assets increases the bank?s incentive to misreport its quality. Fourth, implementation of the sensitive capital requirements cannot rely solely on information revealed on the market for the bank?s assets.
AUTHORS: Kowalik, Michal
To sell or to borrow: a theory of bank liquidity management
AUTHORS: Kowalik, Michal
Volatile mortgage rates - a new fact of life?
Mortgage interest rates now move much more closely with capital market rates than in the past. This important development stems in part from the removal of mortgage usury ceilings. But the main reason for the closer relationship of mortgage rates to capital market rates is growth of the secondary mortgage market.
AUTHORS: Roth, Howard L.
The securitization of housing finance
Since 1970, housing finance has undergone a radical transformation due to the securitization of mortgage loans. As the market for mortgage securities continues to grow and develop, this transformation raises a number of important public policy issues.
AUTHORS: VanNahmen, Deana; Sellon, Gordon H.
Developments in the secondary mortgage market
AUTHORS: Gordon, Kenneth; VanNahmen, Deana
Commentary: improving secondary markets in rural America
AUTHORS: Altman, Frank L.
Improving secondary markets in rural America
AUTHORS: Vandell, Kerry D.
An overview of the secondary market for U.S. Treasury securities in London and Tokyo
AUTHORS: Stehm, Jeff; Madigan, Brian
AUTHORS: Pavel, Christine A.
GSEs, mortgage rates, and secondary market activities
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that purchase mortgages and issue mortgage-backed securities (MBS). In addition, the GSEs are active participants in the primary and secondary mortgage markets on behalf of their own portfolios of MBS. Because these portfolios have grown quite large, portfolio purchases as well as MBS issuance are likely to be important forces in the mortgage market. This paper examines the statistical evidence of a connection between GSE actions and the interest rates paid by mortgage borrowers. We find that both portfolio purchases and MBS issuance have negligible effects on mortgage rate spreads and that purchases are not any more effective than securitization at reducing mortgage interest rate spreads. We also examine the 1998 liquidity crisis and find that GSE portfolio purchases did little to affect interest rates paid by borrowers. These results are robust to alternative assumptions about causality and to model specification.
AUTHORS: Sherlund, Shane M.; Passmore, Wayne; Lehnert, Andreas