It is well known by now that before the financial crisis, systemically important banks and nonbank broker-dealers maintained large proprietary trading operations and had relied on those operations as a key source of trading revenue, in addition to revenue generated by facilitating clients' trading needs.
Trading Activities at Systemically Important Banks, Part 2: What Happened during Recent Risk Events?
As documented in the FEDS Notes article "Trading Activities at Systemically Important Banks, Part 1: Recent Trends in Trading Performance," trading performance at systemically important banks, measured by trading revenue per dollar of value-at-risk (VaR) committed, has trended up over the past few years.
Using a confidential data set collected daily by onsite supervisors, this note provides a comprehensive look at the performance of systemically important banks’ trading and market-making activities since the financial crisis.
This note analyzes recent trends in loan growth at domestic bank holding companies (hereafter, banks) and reviews factors related to bank loan growth such as capital and loan write-downs.
In this note we analyze the systemic nature of settlement fails--the failure to deliver the agreed upon securities--during the 2007-09 period. Large and protracted settlement fails are believed to undermine the liquidity and well-functioning of securities markets, and as a result market groups and policymakers have tried to limit them.
Most accounts of the "Great Moderation"--a decline in macroeconomic volatility in the decades prior to the Great Recession--focus on employment growth and GDP growth.
In this second of two notes we study how dealers deleverage following the 2007-2008 funding squeeze.
More than half of auto financing is originated by non-bank finance companies that typically rely on short-term funding markets for their own financing. During the recent financial crisis, disruptions in these short-term financing markets reduced the availability of auto credit to consumers, which contributed to the decline in auto sales.
This is the first of two notes that empirically document the behavior of U.S. Primary Dealers during the 2007-08 financial crisis. In this note we show that dealers' exposure to risky assets drives the observed repo funding squeeze; moreover, as evident from Lehman's experience, we show that repos become subject to counterparty risk during periods of stress, even when collateralized by the safest assets.
As noted in the Policy Normalization Principles and Plans issued in September 2014, when the Federal Open Market Committee (FOMC) judges that it is appropriate to begin the process of normalizing the size of the balance sheet, it intends to gradually reduce the Federal Reserve's holdings of Treasury securities and agency debt and agency mortgage-backed securities (MBS).
The Financial Accounts of the United States reports quarterly net equity issuance of nonfinancial corporations.
In the U.S., geography has long been viewed as a proxy for income and race.
Unfavorable macroeconomic and financial scenarios are a core element of bank stress tests, and the degree to which variables deteriorate in a scenario--i.e., the scenario’s severity--is a central design feature of any stress test exercise
Job reallocation in the U.S.--the sum of job creation and job destruction across employers--has been declining over several decades.
In an effort to promote more accommodative financial conditions following the financial crisis of 2008 and the ensuing recession, and at a time when the conventional monetary policy tool--the federal funds rat--was at its effective lower bound, the Federal Reserve conducted large-scale asset purchases (LSAPs) and a maturity extension program (MEP).
Ample empirical research documents the negative effect of uncertainty on economic activity. Unexpected changes in macroeconomic conditions or doubts about the direction of future policy tend to be associated with lower capital investments, reduced hiring, and slower consumer spending.
This Note explains the differences between two of the models used to produce estimates of US Treasury term premiums which are produced by staff in the Federal Reserve System.
Over the past decade, many U.S. states have enacted policies that temporarily exempt consumer purchases of certain goods from state sales taxes.
As described in a recent statement and blog post, the Federal Reserve Bank of New York (FRBNY), in cooperation with the Office of Financial Research (OFR), is considering the publication of several new benchmark rates for overnight Treasury general collateral repurchase agreement (repo) transactions in order to enhance market transparency and efficiency by improving the quality and breadth of repo market information available to the public.
The Basel Committee on Banking Supervision (BCBS, the Basel Committee, or Basel) has developed a methodology for identifying global systemically important banks (G-SIBs) and standards for requiring G-SIBs to hold more common equity.
In response to the financial crisis of 2008 and the subsequent recession, the Federal Reserve employed large-scale asset purchases (LSAPs) and a maturity extension program (MEP) with the purpose of reducing longer-term interest rates, and thereby promoting more accommodative financial conditions at a time when the conventional monetary policy tool, the federal funds rate, was at its effective lower bound.
Human capital and stocks both provide rewards to those who invest in them, the former through higher future earnings and the latter through appreciation or dividends. The decision to invest in them depends on the relative rewards each asset offers.
Demand for Voluntary Balance Requirements: the U.S. Experience with Contractual Clearing Balances from 2000 to 2007
Contractual clearing balances were a type of balance that a depository institution could voluntarily agree to hold in their account at the Federal Reserve in addition to mandatory reserve requirements, or reserve balance requirements (RBR) prior to 2012.
Disclaimer: FEDS Notes are articles in which Board economists offer their own views and present analysis on a range of topics in economics and finance. These articles are shorter and less technically oriented than FEDS Working Papers.