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Keywords:financial institutions 

537 Days: Time Is Still Ticking

Remarks at LIBOR: Entering the Endgame (a webinar hosted by the Bank of England and the New York Fed) .

Working Paper
Did life insurers benefit from TARP or regulatory forbearance during the financial crisis of 2008–2009?

Life insurers? odds of being placed under regulatory control (for example, conservatorship or receivership) during the financial crisis years of 2008 and 2009 increased with deteriorating fundamentals at a much higher rate than during normal times or during the previous recession. However, no life insurer in the sample belonging to a life insurance holding company system (LIHCS) in receipt of TARP funds experienced such insolvency issues, and life insurers with poor and deteriorating performance that belonged to a LIHCS in receipt of TARP funds received increased capital inflows during the ...
Working Papers , Paper 16-24

Keynote Remarks

Remarks at the Union of Arab Banks' Conference on Anti-Bribery Corruption, the Sixth European Union Anti-Money Laundering Directive, and the Anti-Money Laundering Act of 2020 (delivered via videoconference).

Journal Article
Why Do Supervisors Rate Banking Organizations?

This article addresses a question that at first may appear simple: why do supervisors rate banking organizations? Prudential supervisors have a long-standing practice of confidentially rating the condition of the firms that they supervise. These ratings are used for a variety of purposes and can have important consequences. The authors analyze the history and evolution of this practice and consider how the use of ratings advances the statutory and regulatory goals of supervision of banking organizations. They conclude with a discussion of the implications for the design and implementation of ...
Economic Policy Review , Volume 27 , Issue 3 , Pages 27

Journal Article
Nonparametric Estimation of the Diamond-Dybvig Banking Model

I propose a nonparametric structural estimator for the distribution of liquidity needs in a version of the Diamond and Dybvig (1983) model when only the aggregate level of withdrawals is observed. The model is an extension of Peck and Shell (2003) with a continuum of depositors. I show how the characterization of the optimal contract proposed in Sultanum (2014) can be used to estimate the distribution of aggregate liquidity needs. The method builds on the literature of estimation of auctions. More precisely, it uses the indirect approach proposed by Guerre et al. (2000). Guerre et al. (2000) ...
Economic Quarterly , Issue Q4 , Pages 261-279

The effect of state pension cut legislation on bank values

This study provides an empirical analysis of the impact of Wisconsin and Ohio pension cut legislation on values of banks operating in Wisconsin and Ohio, banks operating in other states in which pension cut legislation was being considered as Wisconsin and Ohio went through its legislative process, and all publicly traded U.S. banks. We find that banks doing business in Wisconsin and Ohio experience positive (negative) stock price reactions to announcements that indicate an increased (a decreased) probability of pension cut legislation. The stock price reactions are positively related to the ...
Staff Reports , Paper 679

Discussion Paper
How Does Market Power Affect Fire-Sale Externalities?

An important role of capital and liquidity regulations for financial institutions is to counteract inefficiencies associated with “fire-sale externalities,” such as the tendency of institutions to lever up and hold illiquid assets to the extent that their collective actions increase financial vulnerabilities. However, theoretical models that study such externalities commonly assume perfect competition among financial institutions, in spite of high (and increasing) financial sector concentration. In this post, which is based on our forthcoming article, we consider instead how the effects ...
Liberty Street Economics , Paper 20211110

CDS and equity market reactions to stock issuances in the U.S. financial industry: evidence from the 2002-13 period

We study seasoned equity issuances by financial and nonfinancial companies between 2002 and 2013. To assess the risk and valuation implications of these issuances, we conduct an event-study analysis using daily credit default swap (CDS) and stock market pricing data. The major findings of the paper are that equity prices do not react to new issues in the pre-crisis period, but react negatively in the crisis. CDS prices respond to new, default-relevant information. Over the full sample period, cumulative abnormal CDS spreads drop in response to equity issuance announcements. The reactions are ...
Staff Reports , Paper 697

Journal Article
Tools (Lessons and Strategies) Toward Market Restoration: A Conference Summary

Community development post-recession takes place in an environment that is greatly changed in terms of both demand for and capacity to deliver services. While no community was immune, the places that were most deeply affected by the Great Recession ? and continue to feel its effects ? are often those places that had suffered from disinvestment for decades leading up to it. The tools and strategies that have been developed and relied on by investors, practitioners and advocates ? in some cases for decades ? need to be adapted to the changes, while continuing to meet ever growing demand.
Profitwise , Issue 4 , Pages 4-23

Journal Article
The Overnight Money Market

This video presentation provides a simple overview of the recent evolution of the U.S. overnight money market and how the Federal Reserve?s tools to implement monetary policy have evolved with the market. The visualization and narration of the money market?s main financial instruments, participants, and respective interactions are meant to simplify complex concepts and relation networks that constitute the foundation of short-term borrowing and lending in U.S. financial markets. For more details, please see the video transcript and references therein.
Economic Perspectives , Issue Q III , Pages 77-78



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