9 posts on "Kristian Blickle"
September 25, 2024
Flood Risk Outside Flood Zones — A Look at Mortgage Lending in Risky Areas
In support of the National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) creates flood maps that indicate areas with high flood risk, where mortgage applicants must buy flood insurance. The effects of flood insurance mandates were discussed in detail in a prior blog series. In 2021 alone, more than $200 billion worth of mortgages were originated in areas covered by a flood map. However, these maps are discrete, whereas the underlying flood risk may be continuous, and they are sometimes outdated. As a result, official flood maps may not fully capture the true flood risk an area faces. In this post, we make use of unique property-level mortgage data and find that in 2021, mortgages worth over $600 billion were originated in areas with high flood risk but no flood map. We examine what types of lenders are aware of this “unmapped” flood risk and how they adjust their lending practices. We find that—on average—lenders are more reluctant to lend in these unmapped yet risky regions. Those that do, such as nonbanks, are more aggressive at securitizing and selling off risky loans.
November 10, 2023
Potential Flood Map Inaccuracies in the Fed’s Second District
The National Flood Insurance Program (NFIP) flood maps, which designate areas at risk of flooding, are updated periodically through the Federal Emergency Management Agency (FEMA) and community efforts. Even so, many maps are several years old. As the previous two posts in the Extreme Weather series show, climate-related risks vary geographically. It is therefore important to produce accurate maps of such risks, like flooding. In this post we use detailed data on the flood risk faced by individual dwellings as well as digitized FEMA flood maps to tease out the degree to which flood maps in the Second District are inaccurate. Since inaccurate maps may leave households or banks exposed to the risk of uninsured flood damage, understanding map inaccuracies is key. We show that, when aggregated to the census tract level, a large number of maps do not fully capture flood risk. However, we are also able to show that updates do in fact improve map quality.
April 20, 2023
Moving Out of a Flood Zone? That May Be Risky!
An often-overlooked aspect of flood-plain mapping is the fact that these maps designate stark boundaries, with households falling either inside or outside of areas designated as “flood zones.” Households inside flood zones must insure themselves against the possibility of disasters. However, costly insurance may have pushed lower-income households out of areas officially designated a flood risk and into physically adjacent areas. While not designated an official flood risk, Federal Emergency Management Agency (FEMA) and disaster data shows that these areas are still at considerable risk of flooding. In this post, we examine whether flood maps may have inadvertently clustered those households financially less able to bear the consequences of a disaster into areas that may still pose a significant flood risk.
May 23, 2022
The Adverse Effect of “Mandatory” Flood Insurance on Access to Credit
The National Flood Insurance Program (NFIP) was designed to reduce household and lender flood-risk exposure and “encourage lending.” In this post, which is based on our related study, we show that in certain situations the program actually limits access to credit, particularly for low-income borrowers—an unintended consequence of this well-intentioned program.
Posted at 7:00 am in Banks, Climate Change, Household Finance, Inequality | Permalink | Comments (2)
April 4, 2022
Climate Change and Financial Stability: The Weather Channel
Climate change could affect banks and the financial systems they anchor through various channels: increasingly extreme weather is one (Financial Stability Board, Basel Committee on Bank Supervision). In our recent staff report, we size up this channel by studying how U.S. banks, large and small, fared against disasters past. We find even the most destructive disasters had insignificant or small effects on bank stability and small and positive effects on bank income. We conjecture that recovery lending after disasters helps stabilize larger banks while smaller, local banks’ knowledge of “unmarked” (flood) hazards may help them navigate disaster risk. Federal disaster aid seems not to act as a bank stabilizer.
February 17, 2022
How (Un‑)Informed Are Depositors in a Banking Panic? A Lesson from History
How informed or uninformed are bank depositors in a banking crisis? Can depositors anticipate which banks will fail? Understanding the behavior of depositors in financial crises is key to evaluating the policy measures, such as deposit insurance, designed to prevent them. But this is difficult in modern settings. The fact that bank runs are rare and deposit insurance universal implies that it is rare to be able to observe how depositors would behave in absence of the policy. Hence, as empiricists, we are lacking the counterfactual of depositor behavior during a run that is undistorted by the policy. In this blog post and the staff report on which it is based, we go back in history and study a bank run that took place in Germany in 1931 in the absence of deposit insurance for insight.
Posted at 7:00 am in Banks, Financial Institutions, Financial Intermediation, Panic, Systemic Risk | Permalink
June 30, 2021
Banking the Unbanked: The Past and Future of the Free Checking Account
About one in twenty American households are unbanked (meaning they do not have a demand deposit or checking account) and many more are underbanked (meaning they do not have the range of bank-provided financial services they need). Unbanked and underbanked households are more likely to be lower-income households and households of color. Inadequate access to financial services pushes the unbanked to use high-cost alternatives for their transactional needs and can also hinder access to credit when households need it. That, in turn, can have adverse effects on the financial health, educational opportunities, and welfare of unbanked households, thereby aggravating economic inequality. Why is access to financial services so uneven? The roots to part of this problem are historical, and in this post we will look back four decades to changes in regulation, shifts in the ownership structure of retail financial services, and the decline of free/low-cost checking accounts in the United States to search out a few of the contributory factors.
Posted at 7:00 am in Banks, Credit, Financial Intermediation, Financial Markets, Inequality | Permalink
February 19, 2020
At the New York Fed: Fourteenth Annual Joint Conference with NYU‑Stern on Financial Intermediation
Blickle, Kovner, and Viswanathan share a synopsis of a recent conference featuring new research in financial intermediation and expert perspectives on corporate credit markets.
Posted at 7:00 am in Financial Intermediation | Permalink
December 18, 2019
Banking System Vulnerability: Annual Update
A key part of understanding the stability of the U.S. financial system is to monitor leverage and funding risks in the financial sector and the way in which these vulnerabilities interact to amplify negative shocks. In this post, we provide an update of four analytical models, introduced in a Liberty Street Economics post last year, that aim to capture different aspects of banking system vulnerability.
Posted at 7:00 am in Bank Capital, Banks, Financial Institutions, Financial Intermediation, Liquidity, Systemic Risk | Permalink
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