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Liberty Street Economics
8 posts from July 2013July 22, 2013
Just Released: Mapping Changes in School Finances
Rajashri Chakrabarti and Max Livingston
This morning, the New York Fed released a set of interactive maps and charts illuminating school finances in New York and New Jersey. These user-friendly graphics illustrate the progression of various school finance indicators over time. They also make clear the large variability in finances across districts and states.
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Posted by Blog Author at 7:02 AM in Education, Fed Funds, New York, Recession, Regional Analysis | Permalink | Comments (1)Distressed Residential Real Estate: Dimensions, Impacts, and Remedies
Diego Aragon, Richard Peach, and Joseph Tracy
On October 5, 2012, the Federal Reserve Bank of New York and the Rockefeller Institute of Government co-hosted the conference “Distressed Residential Real Estate: Dimensions, Impacts, and Remedies.” This post not only makes available a compendium of the findings of the conference, but also updates and extends some of the analysis presented. In particular, we look across states to assess the differential impacts of judicial and non-judicial processes to resolve the foreclosure crisis. Controlling for the peak percentage of loans that were seriously delinquent, we find that non-judicial states are much further along in reducing the backlog of loans in foreclosure. In addition, controlling for the magnitude of the decline in home prices from peak to trough, we observe that home prices have recovered considerably more in the non-judicial states.
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Posted by Blog Author at 7:00 AM in Foreclosure, Housing, Regional Analysis | Permalink | Comments (0)July 19, 2013
Historical Echoes: “Happy Days” and Little Green Pieces of Paper
Amy Farber
In 1965, Baby-Boomer kids may have been treated to TV footage of a high-stepping chorus line and thousands of people cheering to the background tune “Happy Days Are Here Again.” They may have noticed the tinny sound of the singing and the antiquated clothing styles of the people in the footage and, not knowing why they were looking at this, thought: Hey, this is a really great song.
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July 17, 2013
Magnifying the Risk of Fire Sales in the Tri-Party Repo Market
Leyla Alkan, Vic Chakrian, Adam Copeland, Isaac Davis, and Antoine Martin
The fragility inherent in the tri-party repo market came to light during the 2008-09 financial crisis. One of the main vulnerabilities is the risk of fire sales, which can be enhanced by the response of some investors to stress events. Money market mutual funds (MMFs) and the agents investing cash collateral obtained from securities lending (SLs) are thought to behave, in times of stress, in ways that exacerbate fire-sale risks in the tri-party repo market. Based on detailed investor data, we find that MMFs and SLs constitute almost half of the investor market, making it crucial for tri-party repo participants and regulators to account for MMF and SL investment behavior when considering how to mitigate the risk of fire sales.
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Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets, Repo | Permalink | Comments (1)July 15, 2013
Improving Access to Refinancing Opportunities for Underwater Mortgages
Joshua Abel and Joseph Tracy
Since the onset of the housing crisis, a focus of policymakers has been to help underwater homeowners lower their monthly mortgage payments by refinancing, principally through the Home Affordable Refinance Program (HARP). This enables households to commit more money to consumption, debt reduction, and saving. Lower monthly payments also decrease the risk of mortgage defaults, allowing homeowners to stay in their homes and reducing expected losses for mortgage guarantors Fannie Mae and Freddie Mac, which remain under conservatorship of the Federal Housing Finance Agency. Stanching the flow of defaults also helps to firm up the housing market and, therefore, the economy as a whole. In this post, we examine some simple adjustments to HARP that would help to continue the program’s recent success and provide additional support to the housing market recovery—an undertaking that has added significance with the recent increase in mortgage rates, which could hamper refinancing activity moving forward.
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July 12, 2013
Historical Echoes: Andy Warhol and the Art of Money
Megan Cohen
Money has been a topic of keen interest throughout history. As noted in a previous post, this fascination has extended into artwork created centuries ago through modern times. One artist who expanded the concept of what people perceive as art was Andy Warhol.
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July 10, 2013
Common Stock Repurchases during the Financial Crisis
Beverly Hirtle
Large bank holding companies (BHCs) continued to pay dividends to their shareholders well after the onset of the recent financial crisis. Academics, industry analysts, and policymakers have noted that these payments reduced capital at these firms at a time when there was considerable uncertainty about the full extent of losses facing individual banks and the banking industry. But dividends are not the only means to return capital to shareholders; stock repurchases serve much the same function. In this post, I examine common stock repurchases by large BHCs during the financial crisis and show that they behaved very differently from common stock dividends during the same period. While dividends remained relatively constant through late 2008, common stock repurchases dropped quickly after the beginning of the financial crisis, consistent with their historically tighter sensitivity to current performance and financial conditions.
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July 08, 2013
Do Bank Shocks Affect Aggregate Investment?
Mary Amiti and David E. Weinstein
Traditionally, we have thought of the fates of specific banks as perhaps symptomatic of problems in the financial market but not as causal determinants of fluctuations in aggregate investment and other real economic activity. However, the high level of bank concentration in much of the OECD (Organisation for Economic Co-operation and Development) means that large amounts of lending are channeled through a small number of institutions that are no longer small even in comparison to the largest economies. Consequently, problems in a few large institutions could potentially have a large impact on aggregate lending and on real output. Our study of Japanese lending markets is the first to provide a causal link between bank shocks and firm-level investment rates. The results indicate that 40 percent of aggregate lending and investment volatility over the past two decades can be tied to the idiosyncratic successes and failures of financial institutions.
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Posted by Blog Author at 7:00 AM in Exchange Rates, Financial Institutions, Macroecon | Permalink | Comments (0)About the BlogLiberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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