Liberty Street Economics
Return to Liberty Street Economics Home Page

17 posts from "May 2021"
May 27, 2021

Who Benefited from PPP Loans by Fintech Lenders?

In the previous post, we discussed inequalities in access to credit from the Paycheck Protection Program (PPP), showing that, although fintech lenders had a small share of total PPP loan volumes, they provided important support for underserved borrowers. In this post, we ask whether smaller firms received the amount of PPP credit that they requested, and whether loans went to the hardest-hit areas and mitigated job losses. Our results indicate that fintech providers were a key channel in reaching minority-owned firms, the smallest of small businesses, and borrowers most affected by the coronavirus pandemic.

Posted at 10:47 am in Inequality, Pandemic | Permalink

Who Received PPP Loans by Fintech Lenders?

Small businesses not only account for 47 percent of U.S employment but also provide a pathway to success for minorities and women. During the coronavirus pandemic, these small businesses—especially those owned by minorities—were hard hit as consumers reduced spending disproportionately on services that require in-person physical interaction, such as hotels and restaurants. In response, the U.S. government launched the Paycheck Protection Program (PPP) to provide guaranteed and potentially forgivable small business loans. In this post, we examine financial technology (fintech) lenders participating in the PPP and find that, while disbursing only a small share of total loan amounts, they provide important support to minority business owners, who have in the past been underserved by the traditional banking industry.

Posted at 10:46 am in Inequality, Pandemic | Permalink

COVID‑19 and Small Businesses: Uneven Patterns by Race and Income

The COVID-19 pandemic resulted in one of the sharpest recessions and recoveries in U.S. history. As the virus spread over the country in a matter of weeks in March 2020, most states rapidly locked down nonessential economic activity, which plummeted as a result. As the first wave of COVID-19 subsided and people gradually learned to “live with the virus,” states reversed most of the initial lockdowns and economic activity rebounded. In our ongoing Economic Inequality series, we have explored many aspects of how the economic turmoil associated with COVID-19 differentially affected households. Here, we turn to small business experience. The first post in this three-part installment seeks to understand if there was variance in small business activity across counties that differed by income and race. In two companion posts, we investigate the experience of small businesses in terms of credit access, looking at characteristics of who received and who benefited from the Paycheck Protection Program (PPP). The analysis finds inequalities in PPP credit access as well as differences in the loan and recipient county characteristics for those who received loans through financial technology (fintech) providers versus other lenders.

Posted at 10:45 am | Permalink
May 26, 2021

The Overnight Drift in U.S. Equity Returns

Since the advent of electronic trading in the late 1990s, S&P 500 futures have traded close to 24 hours a day. In this post, which draws on our recent Staff Report, we document that holding U.S. equity futures overnight has earned a large positive return during the opening hours of European markets. The largest positive returns in the 1998–2019 sample have accrued between 2 a.m. and 3 a.m. U.S. Eastern time—the opening of European stock markets—and averaged 3.6 percent on an annualized basis, a phenomenon we call the overnight drift.

May 21, 2021

Is the United States Relying on Foreign Investors to Finance Its Bigger Budget Deficit?

The fiscal packages passed in 2020 and 2021 to help the economy cope with the pandemic caused a dramatic increase in federal government borrowing. One might have expected that foreign investors were important buyers of this new debt, but that was not the case. They were instead net sellers of Treasury securities. Still, the amount of money flowing into the United States increased last year, which helped fund the government’s borrowing, if only indirectly. The upturn in inflows, though, was quite modest as a surge in domestic personal saving largely covered the government’s heightened borrowing needs. How the reliance on foreign funds changes in 2021, when the government deficit will again be quite elevated, will depend on whether domestic personal saving remains high.

May 20, 2021

Consumer Credit Demand, Supply, and Unmet Need during the Pandemic

It is common during recessions to observe significant slowdowns in credit flows to consumers. It is more difficult to establish how much of these declines are the consequence of a decrease in credit demand versus a tightening in supply. In this post, we draw on survey data to examine how consumer credit demand and supply have changed since the start of the COVID-19 pandemic. The evidence reveals a clear initial decline and recent rebound in consumer credit demand. We also observe a modest but persistent tightening in credit supply during the pandemic, especially for credit cards. Mortgage refinance applications are the main exception to this general pattern, showing a steep increase in demand and some easing in availability. Despite tightened standards, we find no evidence of a meaningful increase in unmet credit need.

Posted at 7:00 am in Credit, Expectations, Housing, Pandemic | Permalink
May 19, 2021

What’s Next for Forborne Borrowers?

We’ve spent the first three posts of this series discussing who has entered mortgage forbearance, and how their personal finances have developed during the course of the pandemic. In this fourth and final post, we will use Consumer Credit Panel (CCP) data to examine the profiles of those who remain in forbearance and those who have exited, and how the performance of household credit may evolve as the force of the pandemic begins to ebb and the economy reopens and normalizes.

Posted at 11:48 am in Pandemic | Permalink

Small Business Owners Turn to Personal Credit

In our first post in this series we showed that mortgage provisions under the CARES ACT and its subsequent extensions resulted in a rapid take-up of mortgage forbearances, under which borrowers had the option to pause or reduce debt service payments without inducing a delinquency notation on their credit reports. Here we examine the forbearance take-up rate of a group of mortgage borrowers we expect to have been particularly hard hit by the pandemic recession: small business owners. Relatively little is known about how small business owners have fared over the past year in terms of their personal finances. Were they able to continue making mortgage payments on their homes? Did they draw on home equity to help fund their business operations?

Posted at 11:47 am | Permalink

What Happens during Mortgage Forbearance?

As we discussed in our previous post, millions of mortgage borrowers have entered forbearance since the beginning of the pandemic, and over 2 million remain in a program as of March 2021. In this post, we use our Consumer Credit Panel (CCP) data to examine borrower behavior while in forbearance. The credit bureau data are ideal for this purpose because they allow us to follow borrowers over time, and to connect developments on the mortgage with those on other credit products. We find that forbearance results in reduced mortgage delinquencies and is associated with increased paydown of other debts, suggesting that these programs have significantly improved the financial positions of the borrowers who received them.

Posted at 11:46 am in Household Finance, Housing, Inequality | Permalink

Keeping Borrowers Current in a Pandemic

Federal government actions in response to the pandemic have taken many forms. One set of policies is intended to reduce the risk that the pandemic will result in a housing market crash and a wave of foreclosures like the one that accompanied the Great Financial Crisis. An important and novel tool employed as part of these policies is mortgage forbearance, which provides borrowers the option to pause or reduce debt service payments during periods of hardship, without marking the loan delinquent on the borrower’s credit report. Widespread take-up of forbearance over the past year has significantly changed the housing finance system in the United States, in different ways for different borrowers. This post is the first of four focusing attention on the effects of mortgage forbearance and the outlook for the mortgage market. Here we use data from the New York Fed’s Consumer Credit Panel (CCP) to examine the effects of these changes on households during the pandemic.

About the Blog

Liberty 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.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

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

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

Comment Guidelines

 

We 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 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: 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.

Please be respectful: 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.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The 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