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67 posts on "Banks"

April 15, 2019

Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?



HOUSING SERIES: Post 4 of 5
LSE_2019_Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?

From the fourth quarter of 2017 through the third quarter of 2018, the average contract interest rate on new thirty-year fixed rate mortgages rose by roughly 70 basis points—from 3.9 percent to 4.6 percent. During this same period, there was a broad-based slowing in housing market activity with sales of new single-family homes declining by 7.6 percent while sales of existing single-family homes fell by 4.6 percent. Interestingly though, these declines in home sales were larger than in the two previous episodes when mortgage interest rates rose by a comparable amount. This post considers whether provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) might have also contributed to the recent decline in housing market activity.

Continue reading "Is the Recent Tax Reform Playing a Role in the Decline of Home Sales?" »

Posted by Blog Author at 7:00 AM in Banks, Credit, Household, Household Finance, Housing, Mortgages | Permalink | Comments (1)

March 25, 2019

Deciphering Americans’ Views on Cryptocurrencies



LSE_2019_crytocurrencies-perception_martin_460_art

Having witnessed the dramatic rise and fall in the value of cryptocurrencies over the past year, we wanted to learn more about what motivates people to participate in this market. To find out, we included a special set of questions in the May 2018 Survey of Consumer Expectations, a project of the New York Fed’s Center for Microeconomic Data. This blog post summarizes the results of that survey, shedding light on U.S. consumers’ depth of participation in cryptocurrencies and their motives for entering this new market.

Continue reading "Deciphering Americans’ Views on Cryptocurrencies" »

February 27, 2019

Global Trends in Interest Rates



LSE_2019_Global Trends in Interest Rates

Long-term government bond yields are at their lowest levels of the past 150 years in advanced economies. In this blog post, we argue that this low-interest-rate environment reflects secular global forces that have lowered real interest rates by about two percentage points over the past forty years. The magnitude of this decline has been nearly the same in all advanced economies, since their real interest rates have converged over this period. The key factors behind this development are an increase in demand for safety and liquidity among investors and a slowdown in global economic growth.

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February 25, 2019

What Can We Learn from the Timing of Interbank Payments?



LSE_What Can We Learn from the Timing of Interbank Payments?

From 2008 to 2014 the Federal Reserve vastly increased the size of its balance sheet, mainly through its large-scale asset purchase programs (LSAPs). The resulting abundance of reserves affected the financial system in a number of ways, including by changing the intraday timing of interbank payments. In this post we show that (1) there appears to be a nonlinear relationship between the amount of reserves in the system and the timing of interbank payments, and (2) with the increase in reserves, smaller banks shifted their timing of payments more significantly than larger banks did. This result suggests that tracking the timing of payments sent by banks could provide an informative signal about the impact of the shrinking Federal Reserve balance sheet on the payments system.

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Posted by Blog Author at 7:00 AM in Banks, Crisis, Liquidity | Permalink | Comments (1)

February 20, 2019

Stressed Outflows and the Supply of Central Bank Reserves



LSE_Stressed Outflows and the Supply of Central Bank Reserves

Since the financial crisis, banking regulators around the world have been intensely aware of liquidity risk and, in part as a response, have introduced the Basel III liquidity regulation. Today, the world’s largest banks hold substantial liquidity buffers comprising both securities and central bank reserves, to satisfy internal liquidity stress tests and minimum quantitative regulatory requirements. The appropriate level of liquidity buffers depends on the likely outflows in a market stress situation. In this post, we use public data to provide a rough estimate of stressed outflows that the largest banks would face and consider how they could meet these outflows.

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Posted by Blog Author at 7:00 AM in Banks, Federal Reserve, Liquidity | Permalink | Comments (1)

January 18, 2019

Post-Crisis Financial Regulation: Experiences from Both Sides of the Atlantic



LSE_Post-Crisis Financial Regulation: Experiences from Both Sides of the Atlantic

To mark the 100-year anniversary of the Banca d’Italia’s New York office, the Federal Reserve Bank of New York and the Banca d’Italia hosted a workshop on post-crisis financial regulation in November 2018. The goal of the workshop was to discuss differences in regulation between the United States and Europe (and around the globe more broadly), examine gaps in current regulations, identify challenges to be addressed, and raise awareness about the unintended consequences of regulation. The workshop included presentations by researchers from the U.S. and Europe on such topics as market liquidity, funding, and capital requirements. In this post, we present some of the findings and discussions from the workshop.

Continue reading "Post-Crisis Financial Regulation: Experiences from Both Sides of the Atlantic" »

Posted by Blog Author at 7:00 AM in Banks, Central Bank, Crisis, Financial Intermediation | Permalink | Comments (0)

January 17, 2019

The Indirect Costs of Lehman’s Bankruptcy



Fifth of five posts
LSE_The Indirect Costs of Lehman’s Bankruptcy

In our previous post, we assessed losses to customers and clients from foregone opportunities after Lehman Brothers filed for bankruptcy in September 2008. In this post, we examine losses to Lehman and its investors in anticipation of bankruptcy. For example, if bankruptcy is expected, Lehman’s earnings may decline as customers close their accounts or certain securities (such as derivatives) to which Lehman is a counterparty may lose value. We estimate these losses by analyzing Lehman’s earnings and stock, bond, and credit default swap (CDS) prices.

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Posted by Blog Author at 7:00 AM in Banks, Crisis, Stocks | Permalink | Comments (0)

January 16, 2019

Customer and Employee Losses in Lehman’s Bankruptcy



Fourth of five posts
LSE_2019_lehman4-clients_sarkar_460

In our second post on the Lehman bankruptcy, we discussed the cost to Lehman’s creditors from having their funds tied up in bankruptcy proceedings. In this post, we focus on losses to Lehman’s customers and employees from the destruction of firm-specific assets that could not be deployed as productively with other firms. Our conclusions are based in part on what happened after bankruptcy—whether, for example, customer accounts moved to other firms or employees found jobs elsewhere. While these costs are difficult to pin down, the analysis suggests that the most notable losses were borne by mutual funds that relied on Lehman’s specialized brokerage advice and firms that employed Lehman for its equity underwriting services.

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Posted by Blog Author at 7:00 AM in Banks, Crisis, Dealers, Employment, Financial Intermediation | Permalink | Comments (0)

January 14, 2019

Creditor Recovery in Lehman’s Bankruptcy



Second of five posts
LSE_Creditor Recovery in Lehman’s Bankruptcy

Expectations of creditor recovery were low when the Lehman Brothers bankruptcy process started. On the day the firm filed for bankruptcy in September 2008, the average price of Lehman’s senior bonds implied a recovery rate of about 30 percent for senior creditors. A month later the bond price was implying a recovery rate of 9 percent, consistent with results from Lehman’s CDS auction. Two and a half years later, Lehman’s estate estimated that the recovery rate for holding company creditors would be just 16 percent. So, ten years after the filing, how much did creditors actually recover?

Continue reading "Creditor Recovery in Lehman’s Bankruptcy" »

Posted by Blog Author at 7:02 AM in Banks, Crisis, Fire Sale, Liquidity | Permalink | Comments (0)

How Much Value Was Destroyed by the Lehman Bankruptcy?



First of five posts
LSE_How Much Value Was Destroyed by the Lehman Bankruptcy?

Lehman Brothers Holdings Inc. (LBHI) filed for Chapter 11 bankruptcy protection on September 15, 2008, initiating one of the largest and most complex bankruptcy proceedings in history. Recovery prospects for creditors, who submitted about $1.2 trillion of claims against the Lehman estate, were quite bleak. This week, we will publish a series of four posts that provide an assessment of the value lost to Lehman, its creditors, and other stakeholders now that the bankruptcy proceedings are winding down. Where appropriate, we also consider the liquidation of Lehman’s investment banking affiliate, which occurred in separate proceedings under the Securities Investor Protection Act (SIPA).

Continue reading "How Much Value Was Destroyed by the Lehman Bankruptcy?" »

Posted by Blog Author at 7:00 AM in Banks, Crisis, Dealers, Financial Intermediation | Permalink | Comments (2)
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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.

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