News and Commentary
The Cicero Institute’s Judge Glock appears on Macro Musings to chat with David Beckworth about the origins and evolution of the US mortgage market, which Glock covers in his new book The Dead Pledge: The Origins of the Mortgage Market and Federal Bailouts, 1913-1939.
A column in VoxEU compares the speed at which private banks and state-owned banks in India adopted a credit scoring technology introduced in the country in 2007. Whether or not a bank utilizes the technology is primarily explained by the age of the relationship between the bank and the client. In both private and public banks, nearly all new clients have their credit scores checked. For preexisting relationships, the credit check rate for both types of banks have steadily risen since the introduction of the technology. There is, however, a significant difference between private and public banks’ use of this technology due to differing policies and regulations between these types of banks.
New Research
A column in VoxEU discusses a new report by the European System Risk Board. The report analyzes the structural factors that have led to the low interest rate environment (LIRE) that exists today. The report then discusses how the LIRE puts financial stability at risk. Finally, the report offers various policy options to mitigate these risks.
A new paper from NBER by Jacelly C. Cespedes, Carlosa R. Parra, and Clemens Sialm investigates mortgage “cramdowns” on a debtor’s principal place of residence, which have been disallowed since 1993. A cramdown allows the underwater portion of a debtor’s home to be treated as unsecured debt and thus discharged in bankruptcy. Based on their analysis of mortgage cramdowns between 1987 and 1993, the authors find that cramdowns significantly reduce home foreclosures and help to prevent financially troubled homeowners from moving out.
A new paper from NBER by Juan M. Morelli, Pablo Ottonello, and Diego J. Perez examine the role global financial intermediaries play in systemic debt crises. The authors use new empirical evidence and a quantitative model of the world economy with heterogenous borrowers and financial intermediaries to do so.
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