-
About the
New York Fed -
Economic
Research -
Financial Institution Supervision
- Financial Services
& Infrastructure- Outreach
& EducationThe New York Fed engages with individuals, households and businesses in the Second District and maintains an active dialogue in the region. The Bank gathers and shares regional economic intelligence to inform our community and policy makers, and promotes sound financial and economic decisions through community development and education programs.
Liberty Street Economics
15 posts from October 2015October 19, 2015
Reframing the Debate about Payday Lending
Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. Their detractors include many law professors, consumer advocates, members of the clergy, journalists, policymakers, and even the President! But is all the enmity justified? We show that many elements of the payday lending critique—their “unconscionable” and “spiraling” fees and their “targeting” of minorities—don’t hold up under scrutiny and the weight of evidence. After dispensing with those wrong reasons to object to payday lenders, we focus on a possible right reason: the tendency for some borrowers to roll over loans repeatedly. The key question here is whether the borrowers prone to rollovers are systematically overoptimistic about how quickly they will repay their loan. After reviewing the limited and mixed evidence on that point, we conclude that more research on the causes and consequences of rollovers should come before any wholesale reforms of payday credit.
Continue reading "Reframing the Debate about Payday Lending" »
The Tri-Party Repo Market Like You Have Never Seen It Before
The tri-party repo market is a large and important market where securities dealers find a substantial amount of short-term funding. Despite its importance, this market was very opaque before the crisis. Since March 2010, in accordance with recommendation 13 of the Task Force on Tri-Party Repo Infrastructure Reform report, the Federal Reserve Bank of New York has made monthly data on the tri-party repo market available to the public. Today, with our new interactive tool, there is a whole new way to view the market and its evolution. You can make your own charts, looking at volumes for specific asset classes, at haircuts, or at concentration, over your preferred time horizon.
Continue reading "The Tri-Party Repo Market Like You Have Never Seen It Before" »
October 16, 2015
Just Released: Regional Service Sector Resilient even as Manufacturing Slumps
The October 2015 Business Leaders Survey of regional service firms, released today, paints a considerably more benign picture of local business conditions than the more troubling October 2015 Empire State Manufacturing Survey, released yesterday. The two surveys point to diverging trends in the regional economy: manufacturing firms report that business activity has weakened, on balance, for the third month in a row, while regional service firms, though far from euphoric, remain slightly positive, on balance, about business trends. One of the reasons for this divergence seems to be the strong dollar, which has had negative effects on far more manufacturers than service firms, according to our surveys.
Continue reading "Just Released: Regional Service Sector Resilient even as Manufacturing Slumps" »
Posted by Blog Author at 8:45 AM in Exchange Rates, Exports, Macroecon, Regional Analysis | Permalink | Comments (0)Historical Echoes: Who Wants to Be the Richest Economist?
You might think that, given the extreme levels of wealth that exist today, the richest economist would be someone who was still alive. But you’d be wrong.Continue reading "Historical Echoes: Who Wants to Be the Richest Economist?" »
October 15, 2015
Evaluating the Rescue of Fannie Mae and Freddie Mac
In September 2008, the U.S. government engineered a dramatic rescue of Fannie Mae and Freddie Mac, placing the two firms into conservatorship and committing billions of taxpayer dollars to stabilize their financial position. While these actions were characterized at the time as a temporary “time out,” seven years later the firms remain in conservatorship and their ultimate fate is uncertain. In this post, we evaluate the success of the 2008 rescue on several key dimensions, drawing from our recent research article in the Journal of Economic Perspectives.
Continue reading "Evaluating the Rescue of Fannie Mae and Freddie Mac" »
Posted by Blog Author at 7:00 AM in Crisis, Financial Institutions, Housing, Mortgages | Permalink | Comments (5)October 14, 2015
Dealers’ Positions and the Auction Cycle
The aftermath of the financial crisis and changes in technology and regulation have spurred a spirited discussion of dealers’ evolving role in financial markets. One such role is to buy securities at auction and sell them off to investors over time. We assess this function using data on primary dealers’ positions in benchmark Treasury securities, released by the New York Fed since April 2013 and described in this earlier Liberty Street Economics post.
Continue reading "Dealers’ Positions and the Auction Cycle" »
Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets | Permalink | Comments (0)October 09, 2015
The Liquidity Mirage
Sixth in a six-part series
Market efficiency is often pointed to as a main benefit of automated and high-frequency trading (HFT) in U.S. Treasury markets. Fresh information arriving in the market place is reflected in prices almost instantaneously, ensuring that market makers can maintain tight spreads and that consistent pricing of closely related assets generally prevails. While the positive developments in market functioning due to HFT have been widely acknowledged, we argue that the (price) efficiency gain comes at the cost of making the real-time assessment of market liquidity across multiple venues more difficult. This situation, which we term the liquidity mirage, arises because market participants respond not only to news about fundamentals but also market activity itself. This can lead to order placement and execution in one market affecting liquidity provision across related markets almost instantly. The modern market structure therefore implicitly involves a trade-off between increased price efficiency and heightened uncertainty about the overall available liquidity in the market.
October 08, 2015
Redemption Risk of Bond Mutual Funds and Dealer Positioning
Fifth in a six-part seriesMarket participants have recently voiced concerns that bond markets seem to become illiquid precisely when they want to sell bonds. Some possible reasons for a decline in corporate bond market liquidity in times of stress include the increasing share of corporate bond ownership by mutual funds and the reduced share of corporate bond ownership by dealers. In this post, we examine the potential effects of outflows from bond mutual funds and the role of dealers’ positioning in corporate bonds.
Continue reading "Redemption Risk of Bond Mutual Funds and Dealer Positioning" »
Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets, Liquidity | Permalink | Comments (0)October 07, 2015
Changes in the Returns to Market Making
Fourth in a six-part series
Since the financial crisis, major U.S. banking institutions have increased their capital ratios in response to tighter capital requirements. Some market analysts have asserted that the higher capital and liquidity requirements are driving up the costs of market making and reducing market liquidity. If regulations were, in fact, increasing the cost of market making, one would expect to see a rise in the expected returns to that activity. In this post, we estimate market-making returns in equity and corporate bond markets to assess the impact of regulations.
Continue reading "Changes in the Returns to Market Making" »
Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets, Regulation | Permalink | Comments (4)October 06, 2015
Has Liquidity Risk in the Treasury and Equity Markets Increased?
Third in a six-part series
Market participants have argued that market liquidity has deteriorated since the financial crisis. However, inspection of common metrics such as bid-ask spreads, market depth, and price impact do not show pronounced reductions in liquidity compared with precrisis levels. In this post, we argue that recent changes in liquidity conditions may best be described in terms of heightened liquidity risk, as opposed to general declines in liquidity levels. We propose a measure that shows liquidity risk has risen in equity and Treasury markets and discuss some factors behind the increase.
Continue reading "Has Liquidity Risk in the Treasury and Equity Markets Increased?" »
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.
Economic Research Tracker
Liberty Street Economics is now available on the iPhone® and iPad® and can be customized by economic research topic or economist.
View by Topicbank capital balance of payments banks central bank corporate finance credit crisis crisis chronicles cryptocurrencies current account dealers demographics dodd-frank dsge economic history education employment euro area exchange rates expectations exports fed funds federal reserve financial institutions financial intermediation financial markets fire sale fiscal policy fomc forecasting foreclosure great recession hey, economist! high frequency trading historical echoes household household finance housing human capital inequality inflation international economics labor economics labor market lender of last resort liquidity macroecon monetary policy mortgages new jersey new york new york city panic phillips curve puerto rico recession regional analysis regulation repo sandy stocks student loans systemic risk tariffs treasury unemployment wagesMost Viewed
Last 12 MonthsUseful LinksComment GuidelinesWe encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:Please be brief: Comments are limited to 1500 characters.Please be quick: Comments submitted after COB on Friday will not be published until Monday morning.Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.Please be on-topic and patient: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post. We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will not be posted.Disclosure PolicyThe LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.Archives - Financial Services
RSS Feed