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Working Paper
The magnitude and cyclical behavior of financial market frictions
Zakrajšek, Egon; Natalucci, Fabio M.; Levin, Andrew T. (2004)
We quantify the cross-sectional and time-series behavior of the wedge between the cost of external and internal finance by estimating the structural parameters of a canonical debt-contracting model with informational frictions. For this purpose, we construct a new dataset that includes balance sheet information, measures of expected default risk, and credit spreads on publicly traded debt for about 900 U.S. firms over the period 1997Q1 to 2003Q3. Using nonlinear least squares, we obtain precise time-specific estimates of the bankruptcy cost parameter and consistently reject the null ...
Finance and Economics Discussion Series , Paper 2004-70

Journal Article
Cash me out
Jossi, Frank (2003-09)
Record numbers seek debt relief through bankruptcy
Fedgazette , Volume 15 , Issue Sep , Pages 13-16

Working Paper
Consumer Bankruptcy, Mortgage Default and Labor Supply
Li, Wenli; Meghir, Costas; Oswald, Florian (2022-08-30)
We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic consumption events, while bankruptcy is governed by the basic institutional framework in the U.S. as implied by Chapter 7 and Chapter 13. The model is estimated using micro data on credit reports and mortgages combined with data from the American Community Survey. We use the model to understand the ...
Working Papers , Paper 22-26

Discussion Paper
Customer and Employee Losses in Lehman’s Bankruptcy
Sarkar, Asani; Denison, Erin; Fleming, Michael J. (2019-01-16)
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

Journal Article
Bankruptcy law and large complex financial organizations: a primer
Bliss, Robert R. (2003-01)
Large complex financial organization (LCFOs) are exposed to multiple problems when they become insolvent. They operate in countries with different approaches to bankruptcy and, within the U.S., multiple insolvency administrators. The special financial instruments that comprise a substantial portion of LCFO assets are exempted from the usual "time out" that permits the orderly resolution of creditor claims. This situation is complicated by the opacity of LCFIs' positions, which may make them difficult to sell or unwind in times of financial crisis. This article discusses these issues and their ...
Economic Perspectives , Volume 27 , Issue Q I , Pages 48-58

Journal Article
Stripdowns and bankruptcy: lessons from agricultural bankruptcy reform
Fitzpatrick, Thomas J.; Thomson, James B. (2010-08)
One type of financial reform being proposed to deal with the aftermath of the housing crisis is allowing bankruptcy judges the authority to modify residential mortgages in a way referred to as a stripdown. The reform is seen by some as a partial solution to the rise in foreclosures and as a Pandora?s box by others. But the debate is not new one. The 1980s farm foreclosure crisis sparked similar proposals and concerns. Congress decided to enact legislation that contained a stripdown provision, resulting in the creation of Chapter 12 in the bankruptcy code. The effects of Chapter 12 stripdown ...
Economic Commentary , Issue Aug

Conference Paper
The changing nature of debt and equity; a legal perspective
Normandin, Charles P. (1989)
Conference Series ; [Proceedings] , Volume 33 , Pages 49-79

Journal Article
Has widespread use of credit cards contributed to the increase in personal bankruptcy?
Stavins, Joanna (2001-10)
Regional Review , Issue Q4 2000 / Q1 2001 , Pages 4-7

Working Paper
On the Measurement of Large Financial Firm Resolvability
Jarque, Arantxa; Walter, John R.; Evert, Jackson (2018-03-02)
We say that a large financial institution is "resolvable" if policymakers would allow it to go through unassisted bankruptcy in the event of failure. The choice between bankruptcy or bailout trades off the higher loss imposed on the economy in a potentially disruptive resolution against the incentive for excessive risk-taking created by an assisted resolution or a bailout. The resolution plans ("living wills") of large financial institutions contain information needed to evaluate this trade-off. In this paper, we propose a tool to complement the living will review process: an impact score ...
Working Paper , Paper 18-6

Conference Paper
Building the legal and regulatory framework
Walker, John L. (2000-06)
Conference Series ; [Proceedings] , Volume 44 , Issue Jun , Pages 31-88

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