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Journal Article
Breaking out of recession: gauging Texas’ response to Fed stimulus
From the time the U.S. recession began in December 2007 through the subsequent recovery, Texas and the Eleventh Federal Reserve District have outperformed the nation.While economic activity is better in Texas, it remains far from robust. And though Texas employment hasn?t fully reclaimed levels reached before the crisis, the other 11 Federal Reserve districts remain 3 to 8 percent below predownturn employment peaks as a postrecessionary disquiet lingers.
Journal Article
Assessing the costs and consequences of the 2007–09 financial crisis and its aftermath
There are few estimates of what society gave up due to the crisis: Our conservative estimate is $50,000 to $120,000 for every U.S. household.
Discussion Paper
Understanding the risks inherent in shadow banking: a primer and practical lessons learned
Examinations of the 2007?09 financial crisis often use the term shadow banking. This paper explains the form and functioning of the shadow banking system, how it relates to systemic risk and the recent financial crisis, and what particular aspects should be highlighted to benefit policymakers as they implement new regulations designed to enhance financial market resiliency. The paper is divided into two parts: The first serves as a primer on shadow banking; the second provides a narrative of how the system froze during the financial crisis and pertinent lessons learned for the current reform ...
Journal Article
The fallacy of a pain-free path to a healthy housing market
In the mid-1990s, the public policy goal of increasing the U.S. homeownership rate collided with a huge leap in financial innovation. Lenders shifted from originating and holding mortgages to originating and packaging them for sale to investors. These new financial products enabled millions of Americans who hadn?t previously qualified to buy a home to become owners. Housing construction boomed, reaching a postwar high?9.1 million homes were built between 2002 and 2006, a period when 5.6 million U.S. households were formed. ; The resulting oversupply of homes presents policymakers with a ...
Discussion Paper
How bad was it? The costs and consequences of the 2007–09 financial crisis
The 2007?09 financial crisis was associated with a huge loss of economic output and financial wealth, psychological consequences and skill atrophy from extended unemployment, an increase in government intervention, and other significant costs. Assuming the financial crisis is to blame for these associated ills, an estimate of its cost is needed to weigh against the cost of policies intended to prevent similar episodes. We conservatively estimate that 40 to 90 percent of one year's output ($6 trillion to $14 trillion, the equivalent of $50,000 to $120,000 for every U.S. household) was foregone ...
Journal Article
Recovering from the housing and financial crisis
The recent recession was unusual because it stemmed from an unsustainable easing of credit standards and financing, which fueled the prior expansion but also the imbalances that led to the worst recession since the 1930s. When losses on new financial practices ended excessive lending, the economy was hit by housing and credit shocks, culminating in a financial crisis. Home construction plunged, wealth fell, credit standards tightened and financial markets seized up. ; The initial impacts of these four shocks on gross domestic product (GDP) were amplified by cyclical interactions between ...
Journal Article
When will the U.S. housing market stabilize?
The hope that housing markets had stabilized in mid-2010 was dashed by subsequent declines in home construction and prices (Charts 1 and 2). Homebuilding peaked about five years ago, and housing prices almost four years ago. Amid such a prolonged downturn, a key question becomes, When will the housing market stabilize and support the economic recovery? We suggest that new home construction may stabilize and start recovering slowly within the next year or so. Our econometric results also indicate that national house prices may hit bottom late this year or in early 2012 and then recover slowly.