dunnettreader + housing   40

Atif R. Mian, Amir Sufi, Emil Verner - Household Debt and Business Cycles Worldwide | NBER - Sept 2015
An increase in the household debt to GDP ratio in the medium run predicts lower subsequent GDP growth, higher unemployment, and negative growth forecasting errors in a panel of 30 countries from 1960 to 2012. Consistent with the “credit supply hypothesis,” we show that low mortgage spreads predict an increase in the household debt to GDP ratio and a decline in subsequent GDP growth when used as an instrument. The negative relation between the change in household debt to GDP and subsequent output growth is stronger for countries that face stricter monetary policy constraints as measured by a less flexible exchange rate regime, proximity to the zero lower bound, or more external borrowing. A rise in the household debt to GDP ratio is contemporaneously associated with a consumption boom followed by a reversal in the trade deficit as imports collapse. We also uncover a global household debt cycle that partly predicts the severity of the global growth slowdown after 2007. Countries with a household debt cycle more correlated with the global household debt cycle experience a sharper decline in growth after an increase in domestic household debt.
paper  paywall  NBER  economic_history  post-WWII  housing  house_prices  mortgages  interest_rates  business_cycles  debt_crisis  debt-overhang  debt-restructuring  macroeconomic_policy  consumer_demand  global_economy  global_financial_cycle  economic_growth 
july 2016 by dunnettreader
FRB: FEDS Notes: Government-Backed Mortgage Insurance Promoted a Speedier Recovery from the Great Recession
URL is for Fed Note that summarizes one part of the larger Paper - April 2016 -- Government-Backed Mortgage Insurance, Financial Crisis, and the Recovery from the Great Recession (PDF) -- Wayne Passmore and Shane M. Sherlund -- Abstract: The Great Recession provides an opportunity to test the proposition that government mortgage insurance programs mitigated the effects of the financial crisis and enhanced the economic recovery from 2009 to 2014. We find that government-sponsored mortgage insurance programs have been responsible for better economic outcomes in counties that participated heavily in these programs. In particular, counties with high levels of participation from government-sponsored enterprises and the Federal Housing Authority had relatively lower unemployment rates, higher home sales, higher home prices, lower mortgage delinquency rates, and less foreclosure activity, both in 2009 (soon after the peak of the financial crisis) and in 2014 (six years after the crisis) than did counties with lower levels of participation. The persistence of better outcomes in counties with heavy participation in federal government programs is consistent with a view that lower government liquidity premiums , lower government credit-risk premiums, and looser government mortgage-underwriting standards yield higher private-sector economic activity after a financial crisis. - Keywords: Financial crisis, Great Recssion, government policy, mortgages - paper downloaded to Tab S2
paper  Fed  Great_Recession  Great_Depression  housing  mortgages  financial_crisis  GSEs  securitization  unemployment  house_prices  countercyclical_policy  downloaded 
july 2016 by dunnettreader
Michael T. Kiley - Macroeconomic Modeling of Financial Frictions for Macroprudential Policymaking: A Review of Pressing Challenges | FRB: FEDS Notes: May 2016
Structural macroeconomic modeling plays a central role economic policy discussions. Over the past fifty years, the overwhelming majority of such efforts have focused on the structural features of household, firm, and government behavior that lead to cyclical fluctuations in employment and inflation and the roles of monetary and fiscal policy in ameliorating undesirable volatility in economic performance. In recent years, the potential role of macroprudential policies in limiting excessive volatility in the financial sector and the consequent effects on economic performance has risen to the fore in academic and policy discussions. While progress in modeling for macroprudential policy analysis has been substantial, there remain many important challenges, and consensus on a core modeling framework remains far away. This note reviews some of the progress witnessed in recent years and challenges that remain. - downloaded to Tab S2
paper  Fed  macroprudential_policies  macroeconomics  economic_models  economic_theory  financial_stability  Great_Recession  bank_runs  money_market  housing  households  house_prices  leverage  intermediation  non-linear_models  downloaded 
july 2016 by dunnettreader
What It's Worth - Building a Strong Financial Future
Americans everywhere struggle to build strong financial futures for themselves and their families. The new book, What It's Worth, provides a roadmap for what families, communities and our nation can do to move forward on the path to financial well-being.
Collection of essays by people working on financial inclusion, asset-building etc. - downloaded via iPhone to DBOX
gig_economy  education-finance  philanthropy  credit  usury  financial_innovation  US_society  inequality-wealth  local_government  pensions  corporate_citizenship  mobility  banking  wages  health_care  access_to_finance  housing  financial_regulation  report  social_entrepreneurs  poverty  downloaded  welfare  US_economy  US_politics  families  mortgages  segregation  inequality  NBFI  unemployment  US_government 
april 2016 by dunnettreader
Price V. Fishback - How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s | NBER January 2016
NBER Working Paper No. 21925 -- The New Deal during the 1930s was arguably the largest peace-time expansion in federal government activity in American history. Until recently there had been very little quantitative testing of the microeconomic impact of the wide variety of New Deal programs. Over the past decade scholars have developed new panel databases for counties, cities, and states and then used panel data methods on them to examine the examine the impact of New Deal spending and lending policies for the major New Deal programs. In most cases the identification of the effect comes from changes across time within the same geographic location after controlling for national shocks to the economy. Many of the studies also use instrumental variable methods to control for endogeneity. The studies find that public works and relief spending had state income multipliers of around one, increased consumption activity, attracted internal migration, reduced crime rates, and lowered several types of mortality. The farm programs typically aided large farm owners but eliminated opportunities for share croppers, tenants, and farm workers. The Home Owners’ Loan Corporation’s purchases and refinancing of troubled mortgages staved off drops in housing prices and home ownership rates at relatively low ex post cost to taxpayers. The Reconstruction Finance Corporation’s loans to banks and railroads appear to have had little positive impact,although the banks were aided when the RFC took ownership stakes. -- paywall on SSRN
paper  SSRN  paywall  economic_history  20thC  Great_Depression  New_Deal  entre_deux_guerres  Keynesianism  housing  mortgages  banking  agriculture  demand-side  government-roles  government_finance  microeconomics 
february 2016 by dunnettreader
Aida Caldera, Mikkel Hermansen, Oliver Röhn - Economic resilience: A new set of vulnerability indicators | VOX, CEPR’s Policy Portal - 19 September 2015
The Global Crisis and its high costs have revived interest in early warning indicators of economic risks. This column presents a new set of indicators to detect vulnerabilities and assess country-specific risks of suffering a crisis. The empirical evidence confirms the usefulness of the vulnerability indicators in warning of severe recessions and crises in OECD countries. But indicators are no silver bullet and should be complemented with other monitoring tools, including expert judgement. -- paper giving overview of OECD Program working on indicators of upcoming crises and macro policies that could be adopted to head off crises -- stress on linkages across 6 clusters of economic activity and potential vulnerabilities -- in tuning indicators, looking at trade off between false positives and insufficient strength of negative signals, and the costs of responding to false positives vs failing to respond to warning flags -- also trying to see how, via linkages, prudential measures in one area might reduce vulnerabilities in other areas, so not left with only the blunt instrument of monetary policy
paper  OECD  OECD_economies  BRICS  business_cycles  recessions  macroeconomic_policy  macroeconomics  macroprudential_policies  financial_system  financial_crisis  credit_booms  fiscal_policy  FX-misalignment  capital_flows  housing  FDI  forecasts 
september 2015 by dunnettreader
Economic resilience - OECD Program with Working Papers and data sets on vulnerability ibdicators
Reducing the vulnerability of economies to crises and strengthening their capacity to absorb and overcome severe shocks while supporting strong growth -- that is strengthening economic resilience -- is a key policy priority. The Economic Resilience work stream aims at providing a systematic and holistic framework, including a set of indicators, to help governments identify vulnerabilities to shocks and crises early on so as to reduce their likelihood and economic cost. The findings arising from this work stream will be used to strengthen macro and structural policies surveillance.
website  OECD  business_cycles  forecasts  economic_indicators  financial_system  recessions  financial_crisis  macroeconomics  macroprudential_policies  macroprudential_regulation  housing  credit_booms 
september 2015 by dunnettreader
Symposium: The Bailouts of 2007-2009 (Spring 2015) | AEAweb: Journal of Economic Perspectives Vol. 29 No.2
Austan D. Goolsbee and Alan B. Krueger - A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler (pp. 3-24) **--** W. Scott Frame, Andreas Fuster, Joseph Tracy and James Vickery - The Rescue of Fannie Mae and Freddie Mac (pp. 25-52) **--** Charles W. Calomiris and Urooj Khan - An Assessment of TARP Assistance to Financial Institutions (pp. 53-80) **--** Robert McDonald and Anna Paulson - AIG in Hindsight (pp. 81-106) **--** Phillip Swagel - Legal, Political, and Institutional Constraints on the Financial Crisis Policy Response (pp. 107-22) -- available online, didn't download
article  journals-academic  financial_system  Great_Recession  financial_crisis  bailouts  bail-ins  capitalism-systemic_crisis  capital_markets  banking  bank_runs  shadow_banking  NBFI  securitization  credit_booms  credit_ratings  incentives-distortions  public-private_partnerships  Fannie_Mae  housing  leverage  financial_system-government_back-stop  financial_innovation  firesales  liquidity  asset_prices  Fed  lender-of-last-resort  regulatory_capture  regulatory_avoidance  credit_crunch  bankruptcy  government_agencies  government_finance  global_economy  global_governance  international_finance  international_monetary_system  international_crisis  property_rights  derivatives  clearing_&_settlement  GSEs  bubbles 
september 2015 by dunnettreader
Òscar Jordà, Moritz Schularick, Alan Taylor - Leveraged bubbles | VOX, CEPR’s Policy Portal - 01 September 2015
The risk that asset price bubbles pose for financial stability is still not clear. Drawing on 140 years of data, this column argues that leverage is the critical determinant of crisis damage. When fuelled by credit booms, asset price bubbles are associated with high financial crisis risk; upon collapse, they coincide with weaker growth and slower recoveries. Highly leveraged housing bubbles are the worst case of all. -- downloaded pdf to Note
paper  bubbles  asset_prices  leverage  credit_booms  housing  financial_crisis  downloaded 
september 2015 by dunnettreader
Robert Reich (Why We Must Fight Economic Apartheid in America)
Almost lost by the wave of responses to the Supreme Court’s decisions last week upholding the Affordable Care Act and allowing gays and lesbians to marry was…
Instapaper  SCOTUS  US_politics  racism  housing  segregation  equality  inequality-opportunity  inequality  education-K-12  discrimination  from instapaper
july 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Why the mortgage interest tax deduction should disappear, but won't - June 2015
In the run-up to the 2012 U.S. Presidential election, Planet Money asked five economists from across the political spectrum for proposals that they would like… Great job of not only showing how distortionary it is, but the impact on all house prices, not just the ones currently enjoying large deductions, if it were to be eliminated. They map out the huge scale of the negative ripple effects on the entire economy if housing prices were to precipitously fall -- folks at the bottom would get hammered the worst in terms of the amount of home equity, and consequently the portion of their wealth, which would be wiped out. The impact on global financial markets would also be ugly. So we're stuck with the system -- nevvah gonns happen
US_economy  US_politics  tax_reform  housing  mortgages  inequality-wealth  from instapaper
june 2015 by dunnettreader
Grateful in Baltimore | Economic Principals
The news from Baltimore had seemed pretty bleak until Friday, when a 35-year-old city prosecutor brought charges against six police officers involved in the death of Freddie Gray last month. An attorney for the Fraternal Order of Police in Baltimore complained of an “egregious rush to judgment.” Those developments got me thinking about some other measures that have been taken over the years to improve civic life in the United States. Baltimore State’s Attorney Marilyn James Mosby grew up in the Dorchester neighborhood of Boston. He mother, father, aunts, and uncles were Boston police officers. Her grandfather, Prescott Thompson, helped organize the Massachusetts Association of Minority Law Enforcement Officers, in 1968. -- Walsh tracks the steps Mosby took to get her where she now is -- a combination of hard work, talent, and deliberate openings of opportunities that had been foreclosed to women and blacks. He ebds, after a series of stats that show conditions, despite being dreadful in Freddie Gray's neighborhood, have improved significantly due to hard work of reformers over decades and changes in government policies. He ends with a blast at those who would blame the financial crisis on CRA -- instead he thinks that the implementation (albeit too little and too slow) has been one of great policy success stories in halting and beginning to reverse the deliberate, racist obstacles to wealth accumulation of African-Americans. -- saved to Instapaper
US_history  US_economy  US_politics  US_politics-race  urban_politics  War_on_Poverty  affirmative_action  segregation  discrimination  housing  African-Americans  poverty  middle_class  banking  credit  access_to_finance  savings  central_government  local_government  local_politics  Instapaper  from instapaper
june 2015 by dunnettreader
Charles A.E. Goodhart, Enrico Perotti - Maturity mismatch stretching: Banking has taken a wrong turn | VOX, CEPR’s Policy Portal CEPR - Policy Insight 81 05/06/2015
Banks were not always as mismatched as today.Till the 19th century, bank lending to the private sector was meant to be primarily for short-term, self-liquidating, trade-related working capital, especially in the guise of ‘real bills’, bills of exchange fnancing trade. This was true since the emergence of banks in the 15th century, supporting merchants in their long-distance trade. This approach persisted in the Anglo-American tradition, where banks discounted promissory notes and held the rest of the portfolio in easily saleable securities, especially Consols. This enabled a credible promise to depositors, as banks’ assets were either short-term, or easily sold, with little maturity mismatch. -- And then came Continental universal banking, employed to play catch up -- and then with disintermediation, and the need for banks to find other business, and securitization, and they became hostage to the long-wave boom and bust of real estate -- Land is scarce and its availability is fxed. In other words, real estate value has a large pure rent component. Thus in any expansion, real estate prices generally rise faster than consumer prices, and become prone to bubbles and busts. To avoid socialising risk taking, what is needed is an intermediation process where the fnancing comes from investors that assume the bulk of such risk. We call for solutions that ensure such risk bearing by focusing on two principles: much greater maturity matching and no insured deposit funding. These goals may be achieved by various means. One avenue is to securitise mortgages with little maturity transformation, such as those funded by bond or pension funds. Another is to create new intermediaries providing mortgage loans where the lender shares in the appreciation, while assuming some risk against the occasional bust. This may be seen as a shift towards the principles of Islamic banking, but it is also a return to tradition as in the early days of banking. -- downloaded pdf to Note
economic_history  18thC  19thC  20thC  21stC  banking  banking-universal  intermediation  maturity_transformation  disintermediation  capital_markets  securitization  housing  real_estate  bubbles  mortgages  financial_innovation  financial_crisis  liquidity  institutional_investors  debt-restructuring  debt-overhang  financial_stability  financial_system-government_back-stop  NBFI  downloaded 
may 2015 by dunnettreader
Charles A.E. Goodhart, Philipp Erfurth - Monetary policy and long-term trends | VOX, CEPR’s Policy Portal - 03 November 2014
There has been a long-term downward trend in labour’s share of national income, depressing both demand and inflation, and thus prompting ever more expansionary monetary policies. This column argues that, while understandable in a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance. The authors propose policies to raise the share of equity finance in housing markets; such reforms could be extended to other sectors of the economy. -- downloaded page as pdf to Note
macroeconomics  global_economy  globalization  labor_share  Labor_markets  inequality-global  inequality  inequality-wealth  OECD_economies  wages  housing  mortgages  debt  debt-overhang  asset_prices  interest_rates  bubbles  real_estate  equity-corporate  equity_markets  central_banks  monetary_policy  financial_system  financial_crisis  LTV  downloaded 
may 2015 by dunnettreader
David Glaser - Paul Krugman on Tricky Urban Economics | Uneasy Money - May 2015
Paul Krugman has a post about a New Yorker piece by Tim Wu discussing the surprising and disturbing increase in vacant storefronts in the very prosperous and… Thinks Krugman should have stressed more the active damage governments can do (and did) when he highlighted the interstate highway system and middle class white flight. Some great quotes from studies of the impact on racially and ethnically marginalized communities -- destroying the "social capital" infrastructure that African-Americans had relied on, thereby reinforcing the impact of discriminatory private and public policies of both Jim Crow and residentia and workforce segregation in the Northern cities. And excellent examples of how the upper end of the wealth spectrum was repeatedly able to protect their urban communities in the freeway wars -- e.g. Cambridge and Georgetown.
US_history  20thC  post-WWII  political_economy  US_politics  urban_development  urban_politics  urban_elites  NIMBY  suburbs  white_flight  governmentality  transport  infrastructure  racism  African-Americans  lower_orders  community  segregation  housing  highways  public_policy  elites-political_influence  policymaking  links  from instapaper
may 2015 by dunnettreader
Xavier Giroud, Holger M. Mueller - Firm Leverage and Unemployment during the Great Recession | NBER April 2015
NBER Working Paper No. 21076 -- We argue that firms’ balance sheets were instrumental in the propagation of shocks during the Great Recession. Using establishment-level data, we show that firms that tightened their debt capacity in the run-up (“high-leverage firms”) exhibit a significantly larger decline in employment in response to household demand shocks than firms that freed up debt capacity (“low-leverage firms”). In fact, all of the job losses associated with falling house prices during the Great Recession are concentrated among establishments of high-leverage firms. At the county level, we find that counties with a larger fraction of establishments belonging to high-leverage firms exhibit a significantly larger decline in employment in response to household demand shocks. Thus, firms’ balance sheets also matter for aggregate employment. -- paywall
paper  paywall  NBER  Great_Recession  financial_crisis  corporate_finance  leverage  unemployment  macroeconomics  economic_models  economic_shocks-propagation  networks-business  demand-side  housing  business_practices  business_cycles 
may 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Residential real estate in China: the delicate balance of supply and demand — Money, Banking and Financial Markets - April 2015
Some observers believe that demand for housing in China is price-insensitive for cultural reasons. Among other things, housing is viewed as a “status good” for those wishing to get married. Another favorable factor is the preparedness of Chinese policymakers to intervene and support housing markets should they soften. Then there is the possibility that central bank policy will be adjusted in a manner designed to further support real estate lending. Yet, there remain grounds for skepticism. The role of big-city home ownership as a status good in Japan did not prevent the massive and destructive land and housing price boom and bust in the 1980s. And, government actions to support China’s housing prices will be fighting an uphill battle if private expectations of capital gains weaken. Not only that, but the day may come when China sees the need to implement a tax on property, if only to provide a better underpinning for municipal finances. This would almost surely drive prices down quickly. Finally, the government’s other objectives of liberalizing the financial system (as a step toward internationalizing the renminbi) and increasing housing supply to meet the needs of a migrating population may prove incompatible with supporting high house price-to-rent ratios. -- really fine update on what's been happening in urbanization, local governments, policies re financial sector liberalization, GNP and personal income growth (and slow down) etc -- copied to Pocket
China  China-economy  financial_system  housing  asset_prices  bubbles  urbanization  economic_growth  financial_regulation  financial_sector_development  financial_stability  banking  NBFI  shadow_banking  regulation-enforcement  tax_reform  taxes  local_government  infrastructure  wages  economic_culture  municipal_finance  Pocket 
april 2015 by dunnettreader
Reading About the Financial Crisis: A 21-Book Review by Andrew W. Lo :: SSRN
Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER) -- The recent financial crisis has generated many distinct perspectives from various quarters. In this article, I review a diverse set of 21 books on the crisis, 11 written by academics, and 10 written by journalists and one former Treasury Secretary. No single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed. -- Pages in PDF File: 41 -- Keywords: Financial Crisis, Systemic Risk, Book Review -- downloaded pdf to Note
paper  SSRN  reviews  books  economic_history  21stC  Great_Recession  financial_crisis  financial_system  financial_regulation  financialization  capital_markets  banking  NBFI  shadow_banking  regulation-enforcement  rent-seeking  fraud  debt  debtors  housing  securitization  derivatives  bank_runs  banking-universal  Glass-Steagal  risk_management  risk-systemic  financial_economics  global_system  global_imbalance  capital_flows  institutional_investors  institutional_economics  bubbles  Minsky  downloaded 
april 2015 by dunnettreader
Òscar Jordà, Moritz Schularick, and Alan M. Taylor - Mortgaging the Future? | The Big Picture - Guest Post - March 27th, 2015
In the six decades following World War II, bank lending measured as a ratio to GDP has quadrupled in advanced economies. To a great extent, this unprecedented expansion of credit was driven by a dramatic growth in mortgage loans. Lending backed by real estate has allowed households to leverage up and has changed the traditional business of banking in fundamental ways. This “Great Mortgaging” has had a profound influence on the dynamics of business cycles. -- update of their 2012 article that goes back to 19thC and does more breakdown of the changes in the financial services industry -- downloaded page as pdf to Note
US_economy  economic_history  macroeconomics  financial_system  financial_innovation  financial_crisis  housing  mortgages  credit  debt  debt_crisis  business_cycles  financialization  NBFI  real_estate  banking  macroprudential_policies  macroprudential_regulation  macroeconomic_policy  downloaded 
march 2015 by dunnettreader
Nick Bunker - Mortgage fraud, income growth, and credit supply | Feb 11, 2015 - Washington Center for Equitable Growth
Earlier this year, a new working paper cast doubt on one of the dominant explanations of the reasons for the 2002-2006 housing bubble in the United States—that growth in mortgage credit and income growth uncoupled as credit flowed to areas to with declining income growth. Instead, economists Manuel Adelino of Duke University, Antoinette Schoar of the Massachusetts Institute of Technology, and Felipe Severino of Dartmouth College, argue that the cause of the increase on household debt was a classic speculative mania. But a new paper by economists Atif Mian of Princeton University and Amir Sufi of the University of Chicago questions this view of the debt build-up. The seeming flaws in the dominant narrative that an increase in the supply of credit caused the bubble, they say, can be explained by one thing: mortgage fraud. -- Bunker links to both papers - didn't download but will follow debate via "House of Debt" blog
paper  21stC  US_economy  Great_Recession  financial_crisis  housing  securitization  capital_markets  mortgages  distribution-income  distribution-wealth  asset_prices  bubbles  fraud  GSEs  bankruptcy  debt  investors  yield  risk  credit  rating_agencies  credit_ratings  speculative_finance  EF-add  from instapaper
february 2015 by dunnettreader
Adelino, Schoar, and Severino - Changes in Buyer Composition and the Expansion of Credit During the Boom :: SSRN - Jan 2015
Manuel Adelino, Duke University, Fuqua School of Business -- Antoinette Schoar, Massachusetts Institute of Technology (MIT), Sloan School of Management; National Bureau of Economic Research (NBER) -- Felipe Severino, Dartmouth College,Tuck School of Business -- Earlier research has suggested that distortions in the supply of mortgage credit during the run up to the 2008 financial crisis, in particular a decoupling of credit flow from income growth, may have been responsible for the rise in house prices and the subsequent collapse of the housing market. Focusing on individual mortgage transactions rather than whole zip codes, we show that the apparent decoupling of credit from income shown in previous research was driven by changes in buyer composition. In fact, the relationship between individual mortgage size and income growth during the housing boom was very similar to previous periods (..). Zip codes that had large house price increases experienced significant changes in the composition of buyers, i.e. home buyers (mortgage applicants) had increasingly higher income than the average residents in an area. Poorer areas saw an expansion of credit mostly through the extensive margin, i.e. a larger numbers of mortgages originated, but at DTI levels in line with borrower income. When we break out the volume of mortgage origination from 2002 to 2006 by income deciles across the US population, we see that the distribution of mortgage debt is concentrated in middle and high income borrowers, not the poor. Middle and high income borrowers also contributed most significantly to the increase in defaults after 2007. These results are consistent with an interpretation where house price expectations led lenders and buyers to buy into an unfolding bubble based on inflated asset values, rather than a change in the lending technology. -- downloaded pdf to Note
paper  SSRN  Great_Recession  financial_crisis  housing  securitization  capital_markets  mortgages  distribution-income  distribution-wealth  asset_prices  bubbles  bad_economics  bad_history  downloaded  EF-add 
january 2015 by dunnettreader
Brad DeLong - Comment on Eberly and Krishnamurthy: Efficient Credit Policies in a Housing Debt Crisis - Jan 2015
On a Brookings study (pdf link) & panel re foreclosure crisis & housing construction way below pre-bubble trend & population growth -- The single-family housing credit channel has not been restored to its old status. Is this a good finance pattern? Was the previous pattern a poor idea in the first place? Or is the country now incurring enormous societal welfare losses due to the Obama administration's failure to use its administrative powers to fix the housing-finance credit channel?
US_economy  financial_system  Great_Recession  housing  banking  securitization  financial_crisis  GSEs  Obama_administration 
january 2015 by dunnettreader
David Fiderer - Guest Post: A Review of Fragile By Design | Next New Deal - Nov 2014
There’s only one reason why The Big Lie seemed so plausible to so many people. The polite word for it is social stereotyping. -- Calomiris and Haber write “At the core of this bargain was a coalition of two very unlikely partners: rapidly growing megabanks and activist groups that promoted expansion of risky mortgage lending to poor and intercity borrowers, such as the Association of Community Organizations for Reform Now (ACORN).” They reference ACORN 11 times. -- And the GSEs did hold about $225 billion of the most senior tranches of private mortgage securities. Court filings and settlements indicate that most of the losses were caused by fraud -- When the GSEs were taken over by the government in September 2008, Fannie’s serious delinquency rate was 1.36%, well below levels seen in the mid-1980s. And Freddie’s serious delinquency rate, 0.93%, was lower than the lowest national average ever recorded by the Mrtg Bnkrs Assoc. According to the MBA, the nationwide serious delinquency rate as of June 30, 2008 was 4.5% For subprime mortgages it was almost 18% -- The irony is rich. This private label securitization system was built over decades, and at every step of the expansion of this predatory and abusive lending system conservative economists were there lending support. Calomiris in particular was an active participant, fighting against any prohibition against single premium credit insurance, opposing prohibitions on loans based on housing collateral that disregarded a borrower’s ability to repay, and writing in 1999 that 125 percent LTV lending was no big deal.
books  reviews  kindle-available  economic_history  financial_system  financial_regulation  financial_crisis  Great_Recession  housing  banking  securitization  GSEs  right-wing  bad_economics  bad_history  capital_markets  shadow_banking  NBFI  EF-add 
november 2014 by dunnettreader
Andreas Fuster and James Vickery - Securitization and the Fixed-Rate Mortgage | FRBNY Staff Reports Number 594 - January 2013 - Revised June 2014
Fixed-rate mortgages (FRMs) dominate the U.S. mortgage market, with important consequences for monetary policy, household risk management, and financial stability. In this paper, we show that the share of FRMs is sharply lower when mortgages are difficult to securitize. Our analysis exploits plausibly exogenous variation in access to liquid securitization markets generated by a regulatory cutoff and time variation in private securitization activity. We interpret our findings as evidence that lenders are reluctant to retain the prepayment and interest rate risk embedded in FRMs. The form of securitization (private versus government-backed) has little effect on FRM supply during periods when private securitization markets are well-functioning. -- Duh! That requires 77 pages to show originators are indifferent as to a GSE or a private FI as long as they can unload their product? Let's see what the authors think the big deal is about "well-functioning private markets" - private securitizers have mostly been in the well-collateralized top end that the GSEs didn't handle but the rating agencies and investors could be comfortable with. The private market eats into the GSEs business only when there's a boom that's going to end in tears - although before the Great Recession the busts were localized, so the private securitizers (and their investors, even in the equity tranches) who got into booms weren't hurt too badly if they were geographically diversified or didn't go all-in with the skeeziest originators or local bankers who were big RE promoters of marginal development. -- downloaded pdf to Note
paper  Fed  capital_markets  banking  housing  securitization  GSEs  mortgages  US_economy  real_estate  financial_regulation  leverage  risk  maturity_transformation  interest_rates  monetary_policy  financial_stability  macroprudential_regulation  consumer_protection  rating_agencies  institutional_investors  downloaded  EF-add 
october 2014 by dunnettreader
Gary A. Dymski, Jesus Hernandez, and Lisa Mohanty - Race, Power, and the Subprime/Foreclosure Crisis: A Mesoanalysis - Working Paper No. 669 | Levy Economics Institute - May 2011
Economists’ principal explanations of the subprime crisis differ from those developed by noneconomists in that the latter see it as rooted in the US legacy of racial/ethnic inequality, and especially in racial residential segregation, whereas the former ignore race. This paper traces this disjuncture to two sources. What is missing in the social science view is any attention to the market mechanisms involved in subprime lending; and economists, on their side, have drawn too tight a boundary for “the economic,” focusing on market mechanisms per se,to the exclusion of the households and community whose resources and outcomes these mechanisms affect. Economists’ extensive empirical studies of racial redlining and discrimination in credit markets have, ironically, had the effect of making race analytically invisible. Because of these explanatory lacunae, two defining aspects of the subprime crisis have not been well explained. First, why were borrowers that had previously been excluded from equal access to mortgage credit instead super included in subprime lending? Second, why didn’t the flood of mortgage brokers that accompanied the 2000s housing boom reduce the proportion of minority borrowers who were burdened with costly and ultimately unpayable mortgages? This paper develops a mesoanalysis to answer the first of these questions. This analysis traces the coevolution of banking strategies and client communities, shaped by and reinforcing patterns of racial/ethnic inequality. The second question is answered by showing how unequal power relations impacted patterns of subprime lending. Consequences for gender inequality in credit markets are also briefly discussed. -- Associated Program: Monetary Policy and Financial Structure -- Related Topic(s): Discrimination Ethnicity Foreclosures Mesoanalysis Race Redlining Subprime mortgage crisis -- downloaded pdf to Note
paper  US_economy  Great_Recession  financial_crisis  bubbles  housing  securitization  banking  shadow_banking  racism  inequality  power-asymmetric  discrimination  ethnic_ID  redlining  financial_economics  social_sciences  interdisciplinarity  financial_access  downloaded 
october 2014 by dunnettreader
The People vs. Federal Bank Settlements and Liquidity Rules | Demos - September 2014
The Big Six settlements are negligible compared to the damage their practices (and the practices of the investment banks they bought at the onset of the crisis rendering them bigger) considering that since 2006, there have been foreclosure actions brought against nearly 15 million homes. With an average value of about $191,000 per home, the total value represented by those foreclosure actions is approximately $2.8 trillion - a far cry from $106 billion. Let this sink in. Our government and bankers settled on $32 billion in maybe-aid to borrowers relative to $2.8 trillion of foreclosed properties many of which are being scooped up by hedge and private equity funds financed by the same big banks. Not only that. These banks have been able to access money at close to 0 percent interest courtesy of the Federal Reserve for nearly six years. Yet, rather than reducing mortgage principals with that extra cheap money, they stockpiled a record volume of $2.5 trillion in excess reserves at the Federal Reserve for which they are reaping 0.25% interest – higher interest than they give their mere mortal customers. -- and the banks are throwing a tizzy fit over increasing liquidity from 1 to 2% of assets -- post also gives figures on obscene consolidation of US banking since the crisis in BofA, Wells Fargo and JPMorganChase
US_economy  US_government  Fed  financial_regulation  banking  Great_Recession  housing  regulation-enforcement  financialization  financial_crisis  inequality  antitrust  oligarchy  political_economy  EF-add 
september 2014 by dunnettreader
Matthew Klein - Where are Americans’ debts? | FT Alphaville - September 3, 2014
Excessive US household borrowing of the 2000s was not evenly distributed. During the peak of the bubble, the average Nevadan carried about two-and-a-half times as much mortgage and consumer debt as the average Texan What’s striking to us, from a new research note published by the Federal Reserve Bank of Cleveland, is that the amount of variation within metro areas was often as big as, if not greater than, the variation between them. Debt reduction since 2007 has been heavily concentrated in extremely indebted neighborhoods, also according to the Cleveland Fed. Many of these ultra-borrowers did not reduce their debt burdens solely out of their income. According to a study from the New York Fed published at the end of last year, foreclosures (red) reduced mortgage balances more than paydowns (green). The concentration of extreme indebtedness among a relatively small subset of the US population may help explain why politicians had relatively little interest in doing anything to mitigate the damage caused by foreclosures. Hopefully the research produced in the aftermath of the crisis will help limit a repeat performance. -- fascinating charts of geographic distribution and debt reduction via foreclosures
US_economy  Great_Recession  housing  debt  consumer_demand  bubbles  US_politics  political_economy  banking  deleverage  leverage 
september 2014 by dunnettreader
Harold Meyerson - The Revolt of the Cities The American Prospect - August 2014
20 years ago, half of America’s dozen largest cities had Republican mayors. -- of the nation’s 30 largest cities, just 4 (San Diego, Indianapolis, Fort Worth, and Oklahoma City) have Republican mayors, and even they have to swim with the urban tides. -- Demographic recomposition has proved a necessary but insufficient prerequisite for urban political change. The newcomers to America’s cities also have had to come together as an effective political force. With few exceptions, the cities that have elected left-populist governments have first reconfigured their power structures by building coalitions dedicated to greater economic and racial equity. Aided in some instances by liberal foundations, these coalitions consist chiefly of unions, community-based organizations in low-income minority neighborhoods, immigrants’ rights groups, affordable-housing advocates, environmental organizations, and networks of liberal churches, synagogues, and mosques. The unions that have been key to the formation of these new coalitions—it’s labor, after all, that has the capacity to provide the lion’s share of funding for these ventures—generally aren’t the municipal employee locals that have a bargaining relationship with elected officials that can limit their freedom of political action. They tend, rather, to be unions of private-sector workers—janitors, hotel housekeepers, hospital orderlies, supermarket clerks. Their members and potential members are often overwhelmingly minority and substantially immigrant. Indeed, the growing importance of these unions coincides with the growth of immigrants’ rights groups in most major cities. -- What’s happening in cities can be described as Obama’s agenda trickling down to the jurisdictions where it has enough political support to be enacted—but it’s also the incubation of policies and practices that will trickle up. With considerable creativity and limited power, the new urban regimes are seeking to diminish the inequality so apparent in cities and so pervasive nationwide. They are mapping the future of liberalism until the day when the national government can bring it to scale.
US_politics  local_government  local_politics  unions  immigration  wages  green_economy  inequality  housing  education  environment  coalitions-progressive  cities  grassroots  parties  progressivism  Obama_administration  state_government  blue_states  EF-add 
september 2014 by dunnettreader
Chris Dillow - Stumbling and Mumbling: Housing vs financial wealth - May 2014
Chris Giles deserves great credit for his careful scrutiny of Thomas Piketty's data, and Piketty also deserves credit for the openness of that data and for his generous response to Chris. Like Justin Wolfers and Paul Krugman, though, I wonder just how damaging Chris's critique is of Piketty's central thesis. Chris says that, in the UK, "there seems to be little consistent evidence of any upward trend in wealth inequality of the top 1 percent." He points to ONS data showing that the top 1% owned 12.5% of all wealth in 2010-12. However, this proportion is depressed because house prices are high. These mean that the owner of quite a modest home has substantial wealth which naturally depresses the proportion of wealth held by the really well-off. If we look only at financial wealth, we see a different picture. The top 1% owns 36.4% of all financial wealth, and the top 10% owns 75.9% (table 2.6b of this Excel file). As the ONS points out, the Lorenz curve for financial wealth is much steeper than that for property wealth. If you believe the ONS is under-counting offshore wealth, inequality is even greater. This poses the question: should we conflate housing and financial wealth as Chris and Thomas both do? Perhaps not, because housing wealth might not have as much "wealthiness" as financial wealth, in four senses: [interesting discussion and links]
economic_history  economic_theory  political_economy  Piketty  inequality  UK_economy  wealth  housing  1-percent  capitalism  power  plutocracy  links  EF-add 
may 2014 by dunnettreader
The Slack Wire: The Nonexistent Rise in Household Consumption
Did you know that about 10 percent of private consumption in the US consists of Medicare and Medicaid? Despite the fact that these are payments by the government to health care providers, they are counted by the BEA both as income and consumption spending for households. I bet you didn't know that. I bet plenty of people who work with the national income accounts for a living don't know that. I know I didn't know it, until I read this new working paper by Barry Cynamon and Steve Fazzari. I've often thought that the best macroeconomics is just accounting plus history. This paper is an accounting tour de force. What they've done is go through the national accounts and separate out the components of household income and expenditure that represent cashflows received and made by households, from everything else. -- long discussion of paper at SSRN - didn't download -- downloaded pdf to Note of Mason paper showing household debt not from borrowing for consumption but effects of high interest and disinflation
paper  SSRN  economic_history  US_economy  consumers  debt  wages  financialization  housing  health_care  statistics  downloaded  EF-add 
may 2014 by dunnettreader
Elizabeth McKellar, Landscapes of London: The City, the Country, and the Suburbs, 1660–1840 (2014) | Yale University Press
The idea of a "Greater London" emerged in the 18th century with the expansion of the city's suburbs. In Landscapes of London, Elizabeth McKellar traces this growth back to the 17th century, when domestic retreats were established in outlying areas. This transitional zone was occupied and shaped by the urban middle class as much as by the elite who built villas there. McKellar provides the first major interdisciplinary cultural history of this area, analyzing it in relation to key architectural and planning debates and to concepts of national, social, and gender identities. She draws on a wide range of source materials, including prints, paintings, maps, poetry, songs, newspapers, guidebooks, and other popular literature, as well as buildings and landscapes. The author suggests that these suburban landscapes—the first in the world—were a new environment, but one in which the vernacular, the rustic, and the historic played a substantial part. This fascinating investigation shows London as the forerunner of the complex, multifaceted modern cities of today. -- Elizabeth McKellar is senior lecturer and staff tutor in the history of art, Open University.
books  amazon.com  17thC  18thC  British_history  cultural_history  social_history  London  architecture  housing  elite_culture  landscape  urban_elites  urban_development  EF-add 
may 2014 by dunnettreader
Mike Konczal - Two Simple Reasons to Not Fight Bubbles With Higher Interest Rates | Next New Deal Nov 2013
Discussion stimulated by Swedish central bank deciding to fight financial instability due to growing housing bubble via raising interest rates -- I've been long fascinated by this topic. The stakes are very high: should we endure a mini-recession, with lower employment and output, to fight a thing called “financial instability”? I offered a list of reasons why the answer should be a resounding "no", but I recently found two more. These two are much clearer, and I think should provide a major hurdle to clear for those who think we should raise rates.

First: Every Target Needs an Instrument...... Second: What Would the Net Effect Even Be?

The short answer here is that we have no idea what the actual effects of raising interest rates would be on financial stability. This was on clear display in the IMF's "The Interaction of Monetary and Macroprudential Policies" from earlier this year. Here's a great chart from that report: [truly great chart of various channels affecting borrowers, creditors and intermediaries]
monetary_policy  central_banks  interest_rates  banking  financial_system  financial_regulation  bubbles  housing  financial_crisis  EF-add 
december 2013 by dunnettreader
Daniel Davies - If this is “secular stagnation”, I want my old job back — Crooked Timber
My point here is that none of this was unknown at the time. The US economic policy structure was aware that they were accommodating China and NAFTA, and aware that the tool of demand management was consumer spending. They might or might not have been aware that the consumer spending was financed by borrowing against housing wealth, but if they weren’t, they thundering well should have been. They got a structural increase in personal sector debt because they wanted one and set policy in order to create one. There’s no good calling it a “bubble” or a “puzzle” now that the shit’s hit the fan.

And so, welcome to the world you made guys. These are the consequences of globalization, entirely predictable and in fact predicted (by Dean Baker, among others). The final conclusion is probably the same as if it was a mysterious secular stagnation; fiscal policy. But the need for fiscal policy is such an obviously correct and obvious fact that more or less any economic argument is going to end up there unless it has major logical or accounting errors. But really – there is no need to tell ourselves ghost stories about animal spirits. There’s no puzzle here. We got this outcome because we wanted it.
20thC  21stC  economic_history  US_economy  global_economy  global_imbalance  trade  geopolitics  international_political_economy  international_finance  bubbles  financial_crisis  banking  shadow_banking  fiscal_policy  monetary_policy  central_banks  Eurozone  housing  consumer_demand  investment  leverage  stagnation  economic_growth  EF-add 
november 2013 by dunnettreader
J Weil: Bank of America’s Foreclosure Frenzy - Bloomberg 6-21-13
The former employees’ statements were filed with a federal court in Boston as part of a lawsuit against Bank of America by homeowners who say they were improperly denied permanent loan modifications. Bank of America says it will respond to the statements in greater detail in a court filing.The workers gave horrific accounts about Bank of America’s compliance with the Home Affordable Modification Program. One consistent theme was that they said they were told to deceive borrowers about the status of their applications.

We have known for years that the U.S. Treasury Department’s Home Affordable Modification Programfailed miserably at its stated goal of helping struggling homeowners. In part, that’s because companies and divisions of major banks that service mortgage loans often can make more money from foreclosures than from loan modifications.

There already has been a $25 billion nationwide whitewash of a settlement between regulators and big banks over improper foreclosure practices, along with billion-dollar payments under a different settlement to consultants who were hired to review those practices. Nobody was prosecuted, much less wrist-slapped.
UK_economy  housing  banking  financial_regulation  consumers  property  fraud  financial_crisis 
june 2013 by dunnettreader
It’s Not a Housing Boom. It’s a Land Grab - COLORLINES | May 2013
Just in the last 12 months, Wall Street’s Blackstone Group has raised $8 billlion to buy up homes on Main Street. Following suit, according to The New Republic, JP Morgan Chase—the nation’s largest bank—has organized a fund to purchase 5,000 single-family homes in states with some of the most depressed real estate prices. As I wrote last year, a former Morgan Stanley housing strategist left that bank, organized a billion dollars, and is purchasing up to 10,000 homes with these new resources.

Paying above market price and with cash, these firms are setting the pace for the housing market and crowding out non-wealthy Americans who would normally buy. As the Washington Post reports, seven out of 10 home sales in states like Florida are made by these institutional investors. In down-and-out markets like Atlanta, four out of 10 home purchases are made by investors.
US_economy  real_estate  capital_markets  economic_growth  investment  housing 
june 2013 by dunnettreader

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