Board of Governors of the Federal Reserve System

The Ins and Outs of Collateral Re-use

In this article, we empirically document how primary dealers use and re-use collateral (that is, financial securities) in the United States.

DOI: https://doi.org/10.17016/2380-7172.2298

How the Largest Bank Holding Companies Grew: Organic Growth or Acquisitions?

In this note, we decompose growth into that related to mergers and acquisitions (M&A) and to all other sources; discuss factors that have affected growth and consolidation; describe our data sources and methodology; and present results.

DOI: https://doi.org/10.17016/2380-7172.2282

Factors in Unemployment Dynamics

The U.S. unemployment rate averaged 8.4% during the first five years of recovery from the Great Recession of 2007-2009, the weakest recovery on record. But as the expansion continued, unemployment continued to decline and by 2018 reached the lowest levels in almost half a century. In this Note, we explore why unemployment remained so high for so long, and what factors contributed to the recent lows.

DOI: https://doi.org/10.17016/2380-7172.2274

Education Debt Owed by Older Families in the 2016 Survey of Consumer Finances

Much of the education debt in the Survey of Consumer Finances (SCF) currently resides in households headed by person 40 years or older. These families are the focus of this note.

DOI: https://doi.org/10.17016/2380-7172.2292

Overview of the changes to the FRB/US model (2018)

This FEDS Note summarizes a more comprehensive set of modifications introduced with the November 2018 public release of the FRB/US model and provides some motivation for why they were made.

DOI: https://doi.org/10.17016/2380-7172.2306

Breaking Down TRACE Volumes Further

This joint FEDS Note and Liberty Street Economics blog post from staff at the Board of Governors and the Federal Reserve Bank of New York aims to share further initial insights on Treasury cash transactions reported in the Financial Industry Regulatory Authority (FINRA)’s Trace Reporting and Compliance Engine (TRACE).

DOI: https://doi.org/10.17016/2380-7172.2299

Money in the Bank? Assessing Families' Liquid Savings using the Survey of Consumer Finances

We estimate that sixty percent of American families have liquid savings of less than three months of their own expenses, and nearly one-quarter have less than $400.

DOI: https://doi.org/10.17016/2380-7172.2275

The Effects of the Ability-to-Repay / Qualified Mortgage Rule on Mortgage Lending

In this note, we use a unique set of mortgage applications and locks data from January 2013 through September 2018 to examine the effects of the ATR/QM rule on mortgage lending and mortgage pricing.

DOI: https://doi.org/10.17016/2380-7172.2296

Intercorporate Equity Holdings in the Financial Accounts of the United States

This FEDS Note details these changes and highlights the new data on intercorporate equity investments available in the Financial Accounts.

DOI: https://doi.org/10.17016/2380-7172.2281

Do Marketplace Lending Platforms Offer Lower Rates to Consumers?

This note analyzes interest rates of loans from the two largest P2P platforms, Lending Club and Prosper, to observe their potential benefits to borrowers.

DOI: https://doi.org/10.17016/2380-7172.2268

Optimal Monetary Policy in a DSGE Model with Attenuated Forward Guidance Effects

In this article, we explore the implications of attenuating the power of forward guidance for the optimal conduct of forward guidance policy in a quantitative DSGE model of the U.S. economy.

DOI: https://doi.org/10.17016/2380-7172.2264

The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Narrative Investigation

In this note, we follow a narrative approach to review historical episodes of significant financial imbalances and examine whether these episodes were linked to macroeconomic overheating.

DOI: https://doi.org/10.17016/2380-7172.2253

The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Quantitative Exploration

In this note, we explore the link between indicators of financial imbalances and macroeconomic performance, focusing on the experience of the United States. In an accompanying note, The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Narrative Investigation, we follow a narrative approach to review historical episodes of significant financial imbalances and examine whether these episodes were linked to macroeconomic overheating.

DOI: https://doi.org/10.17016/2380-7172.2254

Accounting for Reinsurance Transactions in the Financial Accounts of the United States

The net worth of households and nonprofit organizations grows by $249 billion to reflect the value of policies that were previously missing from the Financial Accounts of the United States (Financial Accounts). Businesses also capture $81 billion from previously missing policies. The rest of the world (ROW) sector loses $130 billion on net because they are the reinsurer for many of the policies that are newly recorded. This note describes these changes and their associated effects in more detail. 

DOI: https://doi.org/10.17016/2380-7172.2271

How Can We Measure the Value of a Home? Comparing Model-Based Estimates with Owner-Occupant Estimates

In this note, we assess whether AVM estimates or owner valuations are better at approximating the market value of a home.

DOI: https://doi.org/10.17016/2380-7172.2266

A New Measure of Housing Wealth in the Financial Accounts of the United States

This note introduces a new method for measuring the aggregate value of own-use residential real estate in the United States from 2001 to present.

DOI: https://doi.org/10.17016/2380-7172.2261

Unlocking the Treasury Market through TRACE

This joint FEDS Note and Liberty Street Economics blog post from staff at the Board of Governors and Federal Reserve Bank of New York aims to share initial insights on the Treasury cash transactions data reported to Financial Industry Regulatory Authority (FINRA)'s Trade Reporting and Compliance Engine (TRACE).

DOI: https://doi.org/10.17016/2380-7172.2251

A Wealthless Recovery? Asset Ownership and the Uneven Recovery from the Great Recession

Data from the Federal Reserve Board's Survey of Consumer Finances indicate that although total household wealth has fully recovered from the Great Recession, there has been only modest growth for the vast majority of families since 2010, and most families have not recovered to pre-recession wealth levels. This uneven recovery is explained by declines in home and stock ownership, which have shown little signs of reversing; thus, these disparities appear poised to persist.

DOI: https://doi.org/10.17016/2380-7172.2249

An Estimate of the Long-Term Neutral Rate of Interest

This note proposes a new measure of the high-frequency equilibrium interest rate, one that falls naturally out of a common textbook notion of the economy’s equilibrium interest rate--and which is rooted in one particularly simple and well-known model.

DOI: https://doi.org/10.17016/2380-7172.2227

U.S. Corporations' Repatriation of Offshore Profits

We investigate how companies with large holdings of cash abroad have used those funds following the Tax Cuts and Jobs Act, which eliminated prior tax disincentives on the repatriation of foreign earnings.

DOI: https://doi.org/10.17016/2380-7172.2239

The Monetary Policy Response to Uncertain Inflation Persistence

This FEDS Note considers the implications of uncertainty regarding the persistence of inflation for the conduct of monetary policy.

DOI: https://doi.org/10.17016/2380-7172.2247

The Branch Puzzle: Why Are there Still Bank Branches?

We provide evidence that the persistence of the large number of local bank branches across the country may be due to the fact that both depositors and small businesses continue to value local bank branches.

DOI: https://doi.org/10.17016/2380-7172.2206

Are Income and Credit Scores Highly Correlated?

To the best of our knowledge, statistical analysis on the relationship between income and credit scores using proper data remains scant.  Using a unique proprietary data set, this note attempts to fill the gap in our understanding of this relationship.

DOI: https://doi.org/10.17016/2380-7172.2235

SOMA's Unrealized Loss: What does it mean?

This Note discusses the various valuation measures of the Fed’s securities holdings, what these values mean, and the expected evolution of the value of the SOMA portfolio.

DOI: https://doi.org/10.17016/2380-7172.2234

Simulating the Macroeconomic Effects of Unconventional Monetary Policies

In this note, we describe a method for calculating simulation results and demonstrate the benefits of the integrated model by analyzing a policy that entails an endogenous balance sheet response.

DOI: https://doi.org/10.17016/2380-7172.2225

Effects of fixed nominal thresholds for enhanced supervision

Following the financial crisis, the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the implementation of Basel III significantly changed the regulatory landscape in the U.S.

DOI: https://doi.org/10.17016/2380-7172.2183

(Don't Fear) The Yield Curve

In this note, we show that, for predicting recessions, such measures of a “long-term spread”--the spread in yields between a far-off maturity such as 10 years and a shorter maturity such as 1 or 2 years--are statistically dominated by a more economically intuitive alternative, a “near-term forward spread.”

DOI: https://doi.org/10.17016/2380-7172.2212

Gender-Related Differences in Credit Use and Credit Scores

This note takes advantage of a unique proprietary data set that collects credit payment histories, debt portfolios, credit scores, and demographic information for a sample of consumers.

DOI: https://doi.org/10.17016/2380-7172.2188

High-frequency Spending Responses to the Earned Income Tax Credit

Many households face large, high-frequency changes in income and have limited financial buffers to smooth their consumption through this income volatility. However, few studies have quantified spending responses to such timing shifts in income due to a lack of high-frequency spending data. We use a new dataset of anonymized daily, state-level spending to study a two-week delay in federal tax refunds with an earned income tax credit (EITC) in 2017.

DOI: https://doi.org/10.17016/2380-7172.2199

Where’s the Money Going? The Importance of Accounting for Rent Payments in Measuring a Household’s Financial Obligations

To get a more comprehensive picture of how families’ uncommitted income has evolved since the financial crisis, we analyze a broader measure of households’ committed monthly payments that includes rent for renters, as well as payments to cover mortgages for homeowners and other debt obligations for all families.

DOI: https://doi.org/10.17016/2380-7172.2213

On the Geographic Scope of Retail Mortgage Markets

In this note, we first discuss why markets for mortgage originations are likely to be national in scope. We then show that even if mortgage markets were local, they would be unconcentrated. Finally, we test for an empirical relationship between the local concentration of mortgage lending and changes in mortgage rates and find essentially no correlation of concentration and rates.

DOI: https://doi.org/10.17016/2380-7172.2184

How Does Intergenerational Wealth Transmission Affect Wealth Concentration?

In this note, we seek to establish the role of intergenerational wealth transmission by using the Federal Reserve Board's Survey of Consumer Finances (SCF), which contains extensive information about household balance sheets, intergenerational transfers made and received, and demographic and socioeconomic characteristics of respondents.

DOI: https://doi.org/10.17016/2380-7172.2209

Shedding Light on Our Economic and Financial Lives

In November and December of 2017, we interviewed over 12,000 individuals, representative of all adults in the United States, about their economic and financial lives. Here we discuss the responses on three important economic issues: the role of economic conditions in the opioid epidemic; jobs with irregular schedules and varying income as a potential barrier to full employment; and how low rates of geographic mobility may relate to family support networks.

DOI: https://doi.org/10.17016/2380-7172.2192

Comparing Three Credit Scoring Models

Due to licensing issues, this FEDS Note has been removed from publication.

Is Operational Risk Regulation Forward-looking and Sensitive to Current Risks?

This article evaluates whether US large bank operational risk capital requirements are forward-looking, sensitive to banks’ current exposures, and allow for risk mitigation, and discusses modifications that could bring regulation closer to these goals while also highlighting the potential pitfalls of doing so.

DOI: https://doi.org/10.17016/2380-7172.2198

Monetary Policy Surprises and Monetary Policy Uncertainty

In this note we find that after a given monetary policy surprise, primary dealers--key intermediaries in interest rate markets--tend to adjust their positions in the U.S. Treasury market and their exposures to interest rates more when the prevailing level of policy uncertainty is low than when it is high.

DOI: https://doi.org/10.17016/2380-7172.2176

Low risk as a predictor of financial crises

Reliable indicators of future financial crises are important for policymakers and practitioners. While most indicators consider an observation of high volatility as a warning signal, this column argues that such an alarm comes too late, arriving only once a crisis is already under way. A better warning is provided by low volatility, which is a reliable indication of an increased likelihood of a future crisis.

DOI: https://doi.org/10.17016/2380-7172.2169

On the Benefits of Universal Banks: Concurrent Lending and Corporate Bond Underwriting

In this note, we explore whether "universal banks" provide value to firms through their ability to provide both lending and underwriting services.

DOI: https://doi.org/10.17016/2380-7172.2143

Mobile Banking: A Closer Look at Survey Measures

This note presents new estimates of mobile banking use in 2017, as well as insights on types of users and their behaviors.

DOI: https://doi.org/10.17016/2380-7172.2163

Help Wanted: Evaluating Labor Shortages in Manufacturing

In this note, we examine the extent of labor shortages for the manufacturing sector.

DOI: https://doi.org/10.17016/2380-7172.2164

A Not-So-Great Recovery in Consumption: What is holding back household spending?

Historically, aggregate consumption has closely tracked disposable personal income, government transfers, and household net wealth. In this note, we show that this empirical relationship has broken down in recent years and explore potential explanations for why consumers--at least in the aggregate--may not be spending in line with recent income and wealth gains.

DOI: https://doi.org/10.17016/2380-7172.2159

Measuring Early-Stage Business Formation

New businesses play an important role in overall economic activity. They account for a sizable share of job creation, and they provide a key source of innovation that contributes to overall productivity growth.

DOI: https://doi.org/10.17016/2380-7172.2166

Predicting Recession Probabilities Using the Slope of the Yield Curve

In this FEDS Note, we examine the predictions of various models and recent surveys of the probability of a recession in the near term.

DOI: https://doi.org/10.17016/2380-7172.2146

Interest on Reserves and Arbitrage in Post-Crisis Money Markets

In this note, we use confidential, daily data on wholesale unsecured borrowing and reserve balances to empirically document several salient features of IOR arbitrage trades.

DOI: https://doi.org/10.17016/2380-7172.2136

Some Characteristics of the Decline in Manufacturing Capacity Utilization

In this note, we provide several observations regarding trends in manufacturing capacity utilization rates using data from the Federal Reserve Board and the Census Bureau.

DOI: https://doi.org/10.17016/2380-7172.2162

Student Loan Debt and Aggregate Consumption Growth

Although student debt service is undoubtedly a source of severe financial strain for some individuals, in this discussion we show that the direct effect of increased student debt service on aggregate consumption growth is likely small.

DOI: https://doi.org/10.17016/2380-7172.2127

From Income to Consumption Inequality? Looking through the Lens of Motor Vehicle Purchases

In this note, we assess the pattern of consumption inequality using an alternative data source--namely, new motor vehicle purchases.

DOI: https://doi.org/10.17016/2380-7172.2132

Household Debt-to-Income Ratios in the Enhanced Financial Accounts

This note describes new data on household debt-to-income ratios (DTI) that is being provided in interactive maps as part of the Enhanced Financial Accounts (EFA).

DOI: https://doi.org/10.17016/2380-7172.2138

Do national account statistics underestimate US real output growth?

In this note, we introduce a new estimate of GDO obtained from a Non-Stationary Dynamic Factor model estimated on a large dataset of US macroeconomic indicators.

DOI: https://doi.org/10.17016/2380-7172.2116

Fiscal implications of the Federal Reserve’s Balance Sheet Normalization

This Note summarizes analysis conducted in our recent FEDS working paper that seeks to understand the fiscal implications of the Federal Reserve’s balance sheet normalization program.

DOI: https://doi.org/10.17016/2380-7172.2126

Recent Trends in Small Business Lending and the Community Reinvestment Act

In this note, we analyze data on small business loan originations collected under the Community Reinvestment Act (CRA) to document heterogeneity in the recovery in small business lending since the financial crisis.

DOI: https://doi.org/10.17016/2380-7172.2122