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12 posts from July 2015

July 02, 2015

Did the West Coast Port Dispute Contribute to the First-Quarter GDP Slowdown?



Did the West Coast Port Dispute Contribute to the First-Quarter GDP Slowdown

The decline in U.S. GDP of 0.2 percent in the first quarter of 2015 was much larger than market analysts expected, with net exports subtracting a staggering 1.9 percentage points (seasonally adjusted annualized rate). A range of factors is being discussed in policy circles to try to understand what contributed to this decline. Factors such as the strong U.S. dollar and weak foreign demand are usually incorporated in forecasters’ models. However, the effects of unusual events such as extremely cold weather and labor disputes are more difficult to quantify in standard models. In this post, we examine how the labor dispute at the West Coast ports, which began in the middle of 2014, might have affected GDP growth. Although the dispute started as early as July 2014, major disruptions to international trade did not surface until 2015:Q1. By that time, export and import growth through the West Coast ports in the first quarter were 14 percentage points to 20 percentage points lower than growth through other ports.

Continue reading "Did the West Coast Port Dispute Contribute to the First-Quarter GDP Slowdown?" »

Posted by Blog Author at 7:00 AM in Exports, International Economics | Permalink | Comments (2)

July 01, 2015

What Do Bond Markets Think about “Too-Big-to-Fail” Since Dodd-Frank?



Too-Big-to-Fail Since Dodd-Frank

Second in a two-part series
In our previous post, we concluded that, in rating agencies’ views, there is no clear consensus on whether the Dodd-Frank Act has eliminated “too-big-to-fail” in the United States. Today, we discuss whether bond market participants share these views.

As we discussed in our post on Monday, the Dodd-Frank Act includes provisions to address whether banks remain “too big to fail.” Title II of the Act creates an orderly liquidation mechanism for the Federal Deposit Insurance Corporation (FDIC) to resolve failed systemically important financial institutions (SIFIs). In December 2013, the FDIC outlined a “single point of entry” (SPOE) strategy for resolving failing SIFIs that, in principle, should obviate bailouts. Under the SPOE, the FDIC will be appointed receiver of the top-tier parent holding company, and losses of a subsidiary bank will be assigned to shareholders and unsecured creditors of the holding company (in a “bail-in” arrangement). The company may be restructured by shrinking businesses, breaking it into smaller entities, liquidating assets, or closing operations to ensure that the resulting entities can be resolved in bankruptcy. Crucially, during this process, the healthy subsidiaries of the company, including any banks, will maintain normal operation, thus avoiding the need for bailouts to prevent systemic instability.

Continue reading "What Do Bond Markets Think about “Too-Big-to-Fail” Since Dodd-Frank?" »

Posted by Blog Author at 7:00 AM in Dodd-Frank, Financial Institutions, Financial Markets | Permalink | Comments (0)

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