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57 posts on "Credit"

August 19, 2020

Debt Relief and the CARES Act: Which Borrowers Face the Most Financial Strain?



Debt Relief and the CARES Act: Which Borrowers Face the Most Financial Strain?

In yesterday's post, we studied the expected debt relief from the CARES Act on mortgagors and student debt borrowers. We now turn our attention to the 63 percent of American borrowers who do not have a mortgage or student loan. These borrowers will not directly benefit from the loan forbearance provisions of the CARES Act, although they may be able to receive some types of leniency that many lenders have voluntarily provided. We ask who these borrowers are, by age, geography, race and income, and how does their financial health compare with other borrowers.

Continue reading "Debt Relief and the CARES Act: Which Borrowers Face the Most Financial Strain?" »

Posted by Blog Author at 7:00 AM in Credit, Demographics, Household Finance, Inequality, Pandemic | Permalink | Comments (0)

July 08, 2020

Who Has Been Evicted and Why?



LSE_Who Has Been Evicted and Why?

More than two million American households are at risk of eviction every year. Evictions have been found to cause prolonged homelessness, worsened health conditions, and lack of credit access. During the COVID-19 outbreak, governments at all levels implemented eviction moratoriums to keep renters in their homes. As these moratoriums and enhanced income supports for unemployed workers come to an end, the possibility of a wave of evictions in the second half of the year is drawing increased attention. Despite the importance of evictions and related policies, very few economic studies have been done on this topic. With the exception of the Milwaukee Area Renters Study, evictions are rarely measured in economic surveys. To fill this gap, we conducted a novel national survey on evictions within the Housing Module of the Survey of Consumer Expectations (SCE) in 2019 and 2020. This post describes our findings.

Continue reading "Who Has Been Evicted and Why?" »

Posted by Blog Author at 7:15 AM in Credit, Housing | Permalink | Comments (0)

May 19, 2020

The Primary Dealer Credit Facility



The Primary Dealer Credit Facility

This post is part of an ongoing series on the credit and liquidity facilities established by the Federal Reserve to support households and businesses during the COVID-19 outbreak.

On March 17, 2020, the Federal Reserve announced that it would re-establish the Primary Dealer Credit Facility (PDCF) to allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households. The PDCF started offering overnight and term funding with maturities of up to ninety days on March 20. It will be in place for at least six months and may be extended as conditions warrant. In this post, we provide an overview of the PDCF and its usage to date.

Continue reading "The Primary Dealer Credit Facility" »

May 08, 2020

The Money Market Mutual Fund Liquidity Facility



LSE_2020_facilities-mmlf_laspada_art_460

This post is part of an ongoing series on the credit and liquidity facilities established by the Federal Reserve to support households and businesses during the COVID-19 outbreak.

Over the first three weeks of March, as uncertainty surrounding the COVID-19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation, such as the 2008 financial crisis and the 2011 European bank crisis, outflows from prime and muni MMFs were mirrored by large inflows into government MMFs, which have historically been seen by investors as a safe haven in times of crisis. In this post, we describe a liquidity facility established by the Federal Reserve in response to these outflows.

Continue reading "The Money Market Mutual Fund Liquidity Facility" »

May 06, 2020

Where Have the Paycheck Protection Loans Gone So Far?



Where Have the Paycheck Protection Loans Gone So Far?

The Paycheck Protection Program (PPP) is a central piece of the CARES Act. In the program’s first round, $349 billion in forgivable government-guaranteed loans were extended to small businesses to cover costs related to payroll and utilities, as well as mortgage and rent payments. The program opened for applications on April 3 and was oversubscribed by April 16. Because of its popularity, lawmakers passed a new bill replenishing the fund with another $310 billion and the Small Business Administration (SBA) started approving loans again on April 27. With a new round of PPP lending underway, it is natural to examine the allocation of credit in the first round and ask: Have PPP loans gone to the areas of the country and sectors of the economy hardest hit by COVID-19?

Continue reading "Where Have the Paycheck Protection Loans Gone So Far?" »

Posted by Blog Author at 7:00 AM in Credit | Permalink | Comments (3)

March 04, 2020

How Does Credit Access Affect Job-Search Outcomes and Sorting?



How Does Credit Access Affect Job-Search Outcomes and Sorting?

How does access to consumer credit affect the job finding behavior of displaced workers? Are these workers looking for jobs at larger and more productive firms? What is the impact of consumer credit on the amount of time it takes to find a job? In recent work with Ethan Cohen-Cole we explore these questions by building a new data set of individual credit reports (from TransUnion) merged with administrative earnings data. We describe our approach and our results in this post.

Continue reading "How Does Credit Access Affect Job-Search Outcomes and Sorting?" »

Posted by Blog Author at 7:45 AM in Credit, Labor Market, Unemployment | Permalink | Comments (0)

February 26, 2020

Did Subprime Borrowers Drive the Housing Boom?



Editor’s note: When this post was first published, the chart labels for “Non-Boom Counties” were incorrect; the labels have been corrected. (February 26, 12:00 pm)

Did Subprime Borrowers Drive the Housing Boom?

The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.

Continue reading "Did Subprime Borrowers Drive the Housing Boom?" »

February 24, 2020

Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK



Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK

In recent years there has been a lot of interest in the effect of income inequality (heterogeneity) on the economy, from both academics and policymakers. Researchers have developed Heterogeneous Agent New Keynesian (HANK) models that incorporate heterogeneity and uninsurable idiosyncratic risk into the New Keynesian models that have become a cornerstone of monetary policy analysis. This research has argued that heterogeneity and idiosyncratic risk change many features of New Keynesian models – the transmission of conventional monetary policy, the forward guidance puzzle, fiscal multipliers, the efficacy of targeted transfers and automatic stabilizers, among others. However, the source of the difference between HANK and representative agent New Keynesian (RANK) models remains unclear. This is because HANK models are typically not analytically tractable, leaving it unclear what exactly is driving the results. To shed light on the macroeconomic consequences of heterogeneity, we develop a stylized HANK model that contains key features present in more complicated HANK models.

Continue reading "Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK" »

February 11, 2020

Charging into Adulthood: Credit Cards and Young Consumers



Charging into Adulthood: Credit Cards and Young Consumers

The New York Fed’s Center for Microeconomic Data today released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2019. Total household debt balances grew by $193 billion in the fourth quarter, marking a $601 billion increase in household debt balances in 2019, the largest annual gain since 2007. The main driver was a $433 billion annual upswing in mortgage balances, also the largest since 2007. Auto loan and credit card balances both increased by a brisk $57 billion last year, while student loan balances climbed by a more muted $51 billion, well below the $114 billion increase recorded in 2013—the fastest pace of growth for the series. The source for the Quarterly Report is the New York Fed’s Consumer Credit Panel—a panel data set that now spans twenty-one years, 1999-2019. The unique panel design allows us to identify new entrants to the credit market: as young people age into having credit reports and using credit products, they are “born” into the panel, enabling us to observe the credit behavior of young borrowers.

Continue reading "Charging into Adulthood: Credit Cards and Young Consumers" »

Posted by Blog Author at 11:04 AM in Credit, Household Finance | Permalink | Comments (0)

January 08, 2020

What’s in A(AA) Credit Rating?



Update: Clarifying text regarding the net leverage chart, as well as an additional chart, have been added to the bottom of this post. (January 10, 10:40 a.m.)

What’s in A(AA) Credit Rating?

Rising nonfinancial corporate business leverage, especially for riskier “high-yield” firms, has recently received increased public and supervisory scrutiny. For example, the Federal Reserve’s May 2019 Financial Stability Report notes that “growth in business debt has outpaced GDP for the past 10 years, with the most rapid growth in debt over recent years concentrated among the riskiest firms.” At the upper end of the credit spectrum, “investment-grade” firms have also increased their borrowing, while the number of higher-rated firms has decreased. In fact, there are currently only two U.S. companies rated AAA: Johnson & Johnson and Microsoft. In this post, we examine recent trends in the issuance of investment-grade corporate bonds and argue that the combination of increased BAA issuance and virtually nonexistent AAA issuance both reduces the usefulness of the BAA–AAA spread as a credit risk indicator and poses a financial stability concern.

Continue reading "What’s in A(AA) Credit Rating?" »

Posted by Blog Author at 7:00 AM in Credit, Fire Sale | Permalink | Comments (1)
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