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Keywords:crisis 

Discussion Paper
Did the Fed’s Term Auction Facility Work?

The Federal Reserve introduced the Term Auction Facility (TAF) in December 2007 to provide term loans to banks during the recent financial crisis. In this post, we report on the effectiveness of the TAF during the early stages of the crisis. We find that the TAF was associated with a decrease in the “liquidity premium,” one component of a bank’s borrowing cost. In other words, the TAF worked as intended.
Liberty Street Economics , Paper 20111011

Discussion Paper
Banking Deserts, Branch Closings, and Soft Information

U.S. banks have shuttered nearly 5,000 branches since the financial crisis, raising concerns that more low-income and minority neighborhoods may be devolving into ?banking deserts? with inadequate, or no, mainstream financial services. We investigate this issue and also ask whether such neighborhoods are particularly exposed to branch closings?a development that, according to recent research, could reduce credit access, even with other branches present, by destroying ?soft? information about borrowers that influences lenders? credit decisions. Our findings are mixed, suggesting that further ...
Liberty Street Economics , Paper 20160307

Report
Discount window stigma during the 2007-2008 financial crisis

We provide empirical evidence for the existence, magnitude, and economic cost of stigma associated with banks borrowing from the Federal Reserve?s Discount Window (DW) during the 2007-08 financial crisis. We find that banks were willing to pay a premium of around 44 basis points across funding sources (126 basis points after the bankruptcy of Lehman Brothers) to avoid borrowing from the DW. DW stigma is economically relevant as it increased some banks? borrowing cost by 32 basis points of their pre-tax return on assets (ROA) during the crisis. The implications of our results for the provision ...
Staff Reports , Paper 483

Discussion Paper
Market Liquidity after the Financial Crisis

The possible adverse effects of regulation on market liquidity in the post-crisis period continue to garner significant attention. In a recent paper, we update and unify much of our earlier work on the subject, following up on three series of earlier Liberty Street Economics posts in August 2015, October 2015, and February 2016. We find that dealer balance sheets have continued to stagnate and that various measures point to less abundant funding liquidity. Nonetheless, we do not find clear evidence of a widespread deterioration in market liquidity.
Liberty Street Economics , Paper 20170628

Working Paper
Crises in the Housing Market: Causes, Consequences, and Policy Lessons

The global financial crisis of the past decade has shaken the research and policy worlds out of their belief that housing markets are mostly benign and immaterial for understanding economic cycles. Instead, a growing consensus recognizes the central role that housing plays in shaping economic activity, particularly during large boom and bust episodes. This article discusses the latest research regarding the causes, consequences, and policy implications of housing crises with a broad focus that includes empirical and structural analysis, insights from the 2000's experience in the United ...
Working Papers , Paper 2019-33

Working Paper
The Rise in Home Currency Issuance

Using a large sample of private international bond issues, we document a substantial decline in the share of international bonds denominated in major reserve currencies over the last two decades, and an increase in bonds denominated in issuers? home currencies. These secular trends appear to have accelerated notably after the global financial crisis. Observed increases in home currency foreign bond issuance was larger in countries with stable inflation and lower government debt, and in emerging markets that adopted explicit inflation targeting policies. We then present a model that ...
Working Paper Series , Paper 2014-19

Discussion Paper
The Banking Industry and COVID-19: Lifeline or Life Support?

By many measures the U.S. banking industry entered 2020 in good health. But the widespread outbreak of the COVID-19 virus and the associated economic disruptions have caused unemployment to skyrocket and many businesses to suspend or significantly reduce operations. In this post, we consider the implications of the pandemic for the stability of the banking sector, including the potential impact of dividend suspensions on bank capital ratios and the use of banks’ regulatory capital buffers.
Liberty Street Economics , Paper 20201005

Discussion Paper
Customer and Employee Losses in Lehman’s Bankruptcy

In our second post on the Lehman bankruptcy, we discussed the cost to Lehman’s creditors from having their funds tied up in bankruptcy proceedings. In this post, we focus on losses to Lehman’s customers and employees from the destruction of firm-specific assets that could not be deployed as productively with other firms. Our conclusions are based in part on what happened after bankruptcy—whether, for example, customer accounts moved to other firms or employees found jobs elsewhere. While these costs are difficult to pin down, the analysis suggests that the most notable losses were borne ...
Liberty Street Economics , Paper 20190116

Discussion Paper
Federal Reserve Liquidity Facilities Gross $22 Billion for U.S. Taxpayers

During the 2007-09 crisis, the Federal Reserve took many measures to mitigate disruptions in financial markets, including the introduction or expansion of liquidity facilities. Many studies have found that the Fed’s lending via the facilities helped stabilize financial markets. In addition, because the Fed’s loans were well collateralized and generally priced at a premium to the cost of funds, they had another, less widely noted benefit: they made money for U.S. taxpayers. In this post, I bring information together from various sources and time periods to show that the facilities ...
Liberty Street Economics , Paper 20121107

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