Liberty Street Economics

February 14, 2017

The Evolution of Home Equity Ownership

Andreas Fuster, Eilidh Geddes, and Andrew F. Haughwout

In yesterday’s post, we discussed the extreme swings that household leverage has taken since 2005, using combined loan-to-value (CLTV) ratios for housing as our metric. We also explored the risks that current household leverage presents in the event of a significant downturn in prices. Today we reverse the perspective, and consider housing equity—the value of housing net of all debt for which it serves as collateral. For the majority of households, housing equity is the principal form of wealth, other than human capital, and it thus represents an important form of potential collateral for borrowing. In that sense, housing equity is an opportunity in the same way that housing leverage is a risk. It turns out that aggregate housing equity at the end of 2015 was very close, in nominal terms, to its pre-crisis (2005) level. But housing wealth has moved to a different group of people—made up of people who are older and have higher credit scores than a decade ago. In today’s post, we look at the evolution of housing equity and its owners.

Posted at 7:00 am in Household Finance, Housing, Inequality | Permalink

February 13, 2017

How Resilient Is the U.S. Housing Market Now?

Andreas Fuster, Eilidh Geddes, Benedict Guttman-Kenney, and Andrew F. Haughwout

Housing is by far the most important asset for most households, and, not coincidentally, housing debt dwarfs other household liabilities. The relationship between housing debt and housing values figures significantly in financial and macroeconomic stability, as events during the housing bust of 2006-12 clearly demonstrated. This week, Liberty Street Economics presents five posts touching on various aspects of housing, from the changing relationship between mortgage debt and housing equity to the future of homeownership. In today’s post, we provide estimates of housing equity and explore how vulnerable households are to declines in house prices, using methods introduced in our paper “Tracking and Stress Testing U.S. Household Leverage.”

Posted at 7:00 am in Financial Institutions, Household Finance, Macroeconomics | Permalink | Comments (1)

February 10, 2017

Historical Echoes: The Legacy of Freedman’s Savings and Trust

Julie Sager

Freedman’s Savings and Trust Company, often referred to as the Freedman’s Bank, was created specifically for former slaves and African-American soldiers. It was established by legislation signed by Abraham Lincoln on March 3, 1865, only weeks before his assassination. Groundwork for the bank was laid during a meeting in January of that year by abolitionist preacher John Alvord, who met with a number of others to discuss the possibility of founding a system to assist freed African-Americans in their savings, financial development, and integration into American economic society. In the ten years of its existence, the Freedman’s Bank brought hope and then heartbreak to the African-American community.

Posted at 7:00 am in Historical Echoes | Permalink

February 8, 2017

Beyond 30: Long‑Term Treasury Bond Issuance from 1957 to 1965

Kenneth D. Garbade

As noted in our previous post, thirty years has marked the outer boundary of Treasury bond maturities since “regular and predictable” issuance of coupon-bearing Treasury debt became the norm in the 1970s. However, the Treasury issued bonds with maturities of greater than thirty years on seven occasions in the 1950s and 1960s, in an effort to lengthen the maturity structure of the debt. While our earlier post described the efforts of Treasury debt managers to lengthen debt maturities between 1953 and 1957, this post examines the period from 1957 to 1965.

Posted at 7:00 am in Treasury | Permalink

February 6, 2017

Beyond 30: Long‑Term Treasury Bond Issuance from 1953 to 1957

Kenneth D. Garbade

Ever since “regular and predictable” issuance of coupon-bearing Treasury debt became the norm in the 1970s, thirty years has marked the outer boundary of Treasury bond maturities. However, longer-term bonds were not unknown in earlier years. Seven such bonds, including one 40-year bond, were issued between 1955 and 1963. The common thread that binds the seven bonds together was the interest of Treasury debt managers in lengthening the maturity structure of the debt. This post describes the efforts to lengthen debt maturities between 1953 and 1957. A subsequent post will examine the period from 1957 to 1965.

Posted at 7:00 am in Treasury | Permalink

January 23, 2017

Measuring Americans’ Expectations Following the 2016 Election

John J. Conlon and Basit Zafar

While consumer confidence as measured by various surveys has increased sharply since the national election, the New York Fed’s Survey of Consumer Expectations (SCE) has shown little notable change in expectations. In this post, we show that the difference may partly reflect systematic compositional changes whereby respondents who answer a survey after the election differ in important ways from those answering the survey before the election—something which the SCE largely avoids. We also show that the flat average aggregate outlook in the SCE masks substantial regional/partisan heterogeneity in shifts in expectations.

Posted at 7:00 am in Expectations, Household Finance | Permalink | Comments (1)

January 20, 2017

Historical Echoes: Are There Any Banks on Bank Street?

Amy Farber

Bank Street in New York City is a quaint little six-block stretch in Greenwich Village (see this 48-second video) with a huge cultural legacy—but no banks. Many cities and towns have a Bank Street and often the street is so named because that’s where most of the banks were originally located. (It is not likely that any Bank Street got its name because of proximity to a riverbank.) However, New York City’s Bank Street is not where the banks were originally located and it’s not even in the financial district—it’s in Greenwich Village. Why, then, is it called “Bank Street?”

Posted at 7:00 am in Historical Echoes | Permalink | Comments (1)

January 18, 2017

Advent of Trade Reporting for U.S. Treasury Securities

Michael J. Fleming

Greater transparency is coming to the U.S. Treasury securities market. Members of the Financial Industry Regulatory Authority (FINRA) will be required to report their trades in Treasuries using FINRA’s Trade Reporting and Compliance Engine (TRACE) starting July 10, 2017. Although initial collection efforts are focused on providing such data to the official sector, the public will likely have access in the future. In this post, I discuss the motivation for such reporting, how it came to be decided on, and the evidence from the corporate bond market on how public access to such data affects trading costs.

Posted at 7:00 am in Financial Markets | Permalink

January 13, 2017

Historical Echoes: Tracking Money

Hayley Mink

Have you ever wondered where your dollars go when you spend them? Not in financial terms, but their physical location? Well, there’s an app and a website for that.

Posted at 7:00 am in Historical Echoes | Permalink | Comments (3)

January 11, 2017

Credit Market Arbitrage and Regulatory Leverage

Nina Boyarchenko, Pooja Gupta, Nick Steele, and Jacqueline Yen

In a companion post, we examined the recent trends in arbitraged-based measures of liquidity in the cash bond and credit default swap (CDS) markets.

Posted at 7:00 am in Financial Markets | Permalink | Comments (1)

Markets & Policy Implementation

Liberty Street Economics

The Evolution of Home Equity Ownership

How Resilient Is the U.S. Housing Market Now?

Historical Echoes: The Legacy of Freedman’s Savings and Trust

Beyond 30: Long‑Term Treasury Bond Issuance from 1957 to 1965

Beyond 30: Long‑Term Treasury Bond Issuance from 1953 to 1957

Measuring Americans’ Expectations Following the 2016 Election

Historical Echoes: Are There Any Banks on Bank Street?

Advent of Trade Reporting for U.S. Treasury Securities

Historical Echoes: Tracking Money

Credit Market Arbitrage and Regulatory Leverage

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