Just Released: Press Briefing on Household Debt and Credit

Meta Brown, Andrew Haughwout, Donghoon Lee, Joelle Scally,
and Wilbert van der Klaauw

This morning, New York Fed director of research Jamie McAndrews joined Bank economists to brief the press on economic developments. With this morning’s release of the Quarterly Report on Household Debt and Credit for 2012:Q4, the briefing focused specifically on recent developments in household debt and credit.

How Did Education Financing in New Jersey’s Abbott Districts Fare during the Great Recession?

Rajashri Chakrabarti and Sarah Sutherland

In the state of New Jersey, any child between the ages of five and eighteen has the constitutional right to a thorough and efficient education. The state also has one of the country’s most rigid policies regarding a balanced budget. When state and local revenues took a big hit in the most recent recession, officials had to make tough decisions about education spending. In this post, we analyze education financing and spending in two groups of high-poverty districts during the Great Recession and the ARRA (American Recovery and Reinvestment Act of 2009) federal stimulus period—the Abbott and Bacon districts. Analysis in our recent New York Fed staff report shows that the Abbott districts exhibited the sharpest declines—relative to trend—in both total funding and total spending per pupil during the post-recession era. Additionally, the Abbott districts were the only group of districts in New Jersey to present statistically significant negative shifts in instructional spending, even with the federal stimulus.

The Minimum Balance at Risk: A Proposal to Stabilize Money Market Funds

Marco Cipriani, Michael Holscher, Antoine Martin, and Patrick McCabe  

In a June post, we explained why the design of money market funds (MMFs) makes them prone to runs and thereby contributes to financial instability. Today, we outline a proposal for strengthening MMFs that we’ve put forward in a recent New York Fed staff report. The proposal aims to reduce, and possibly eliminate, the incentive for investors to run from a troubled fund, while retaining the defining features of money market funds that make them popular financial products. U.S. Treasury Secretary Timothy Geithner, in a recent letter to the Financial Stability Oversight Council, requested that it consider an idea similar to what we described in our staff report as one of several potential options for reforming MMFs to address their structural vulnerabilities.

Soaring Tuitions: Are Public Funding Cuts to Blame?

Rajashri Chakrabarti, Maricar Mabutas, and Basit Zafar

Public colleges and universities play a vital role in training a state’s workforce, yet state support for higher education has been declining for years. As a share of total revenues for America’s public institutions of higher education, state and local appropriations have fallen every year over the past decade, dropping from 70.7 percent in 2000 to 57.1 percent in 2011. At the same time, college enrollment numbers have swelled across the country—public institutions’ rolls grew from 8.6 million full-time students in 2000 to 11.8 million in 2011. Faced with dwindling funding from the states, public institutions of higher education have been forced to find ways to shift their costs or raise revenue on their own. In this post, we analyze the relationship between changes in state and local funding for higher education and changes in public institution tuition.

Just Released: The Federal Reserve in the 21st Century 2012 Symposium

Eric Tucker*

The Federal Reserve in the 21st Century (Fed 21) symposium on monetary policy and financial stability recently brought together over 225 college professors from around the region and the world. The annual two-day event gives professors who teach economics, finance, or business the opportunity to hear presentations from top Federal Reserve Bank of New York economists and senior staff and ask them questions. Fed 21 is part of the Bank’s broader efforts to increase public understanding of the Federal Reserve System’s role in conducting monetary policy and ensuring financial stability.

Just Released: Chairman Bernanke Returns to His Academic Roots, Part 2

Argia M. Sbordone

This week, Federal Reserve Chairman Ben Bernanke completed his four-lecture series for undergraduate students at the George Washington School of Business in Washington, D.C. The lectures have been part of the Chairman’s ongoing effort to educate the public about the Federal Reserve and the role it played during the recent financial crisis. Building upon last week’s broad overview of the origin and mission of central banks and the lessons learned from previous financial crises, this week’s lectures—presented on March 27 and 29—centered on the financial crisis that emerged in 2007. The Chairman discussed the build-up of the crisis and the actions taken by the Federal Reserve and other central banks to address the financial crisis and the ensuing recession.

Just Released: Chairman Bernanke Returns to His Academic Roots

Argia M. Sbordone

Federal Reserve Chairman Ben Bernanke is back in the classroom this month to deliver a series of four lectures for undergraduate students at the George Washington School of Business in Washington, D.C. It’s a welcome reconnection with students for Chairman Bernanke, who joined the Federal Reserve System in 2002 after a long career as an economics professor at Stanford University and later at Princeton University. The lectures at the George Washington School are part of Bernanke’s ongoing effort to educate the public about the role played by the Federal Reserve during the recent financial crisis. The nature and the scope of these lectures allow the Chairman to draw upon his background as a scholar of the Great Depression and his experience at the helm of the U.S. central bank to put the financial crisis in a broader context. The Chairman will talk about the origins and mission of central banks, identify the lessons learned from previous financial crises, and describe how those lessons informed the Fed's decisions during the recent crisis.

Tough Decisions, Depleted Revenues: New Jersey’s Education Finances during the Great Recession

Rajashri Chakrabarti and Sarah Sutherland*

Today’s post, which complements Monday’s on New York State, considers the Great Recession’s impact on education funding in New Jersey. Using analysis published in our recent staff report, “Precarious Slopes? The Great Recession, Federal Stimulus, and New Jersey Schools,” we examine how school finances were affected during the recession and the ARRA federal stimulus period. We find strong evidence of a significant decline—relative to trend—in school revenues and expenditures following the recession as well as key compositional changes that could affect school financing and student learning. Our findings are noteworthy in view of the importance of investing in children’s education for human capital formation and economic growth.

How Did the Great Recession Affect New York State’s Public Schools?

Rajashri Chakrabarti and Elizabeth Setren*

Surprisingly, there is no literature on how recessions (including the Great Recession) have affected schools. Perhaps this is because educational funding stresses and decisions vary among and within states, which makes it hard to reach general conclusions. Yet schools play an indispensable role in our society, educating the populace and building the nation’s future. Therefore, it is important to understand how the Great Recession is affecting public spending on schools, the delivery of education services, and student learning. In this post, we analyze one state’s experience, drawing on our study “The Impact of the Great Recession on School District Finances: Evidence from New York.” While we do not find evidence of much impact on schools’ overall revenue or expenditures, we do detect important compositional changes that could affect both student learning and school financing in coming years.

Unintended Consequences in School Accountability Policies

Rajashri Chakrabarti and Noah Schwartz*

Over the past two decades, state and federal education policies have tried to hold schools more accountable for educating their students. A common criticism of these policies is that they may induce schools to “game the system” with strategies such as excluding certain types of students from computation of school average test scores. In this post, based on our recent New York Fed staff report, “Vouchers, Responses, and the Test Taking Population: Regression Discontinuity Evidence from Florida,” we investigate whether Florida schools resorted to such strategic behavior in response to a voucher program. We find some evidence that Florida’s schools strategically reclassified weak students into exempt categories, and we draw some lessons that are applicable to New York City’s education policies.