This Week in Financial Regulation, September 17th

This Week in Financial Regulation, September 17th

News and Commentary

In an article in The Washington Post, Rachel Siegel covers the state of play in Biden’s pick for the Federal Reserves Vice Chair for Supervision, alternatively known as “the Fed’s top banking cop.”

In remarks at Jackson Hole, Donald Kohn proposed adjustments to regulatory policies to bolster financial stability. “The system is stronger than it was going into the Global Financial Crisis (GFC), but much remains to be done, especially in nonbank finance.”

 

New Research

In an NBER working paper, Jeremy Bulow and Paul Klemperer assess the effect of regulatory forbearance on banks’ appetite for good debt and on partially-insured banks’ behavior.

In an NBER paper (also a chapter in The Handbook of Industrial Organization), Robert Clark, Jean-Fran├žois Houde, and Jakub Kastl discuss the literature approaching finance from an industrial organization perspective.

In an NBER paper, J. Scott Davis and Eric van Wincoop “develop a theory to account for changes in prices of risky and safe assets and gross and net capital flows over the global financial cycle. . . In both the data and the theory, leveraged countries (net borrowers of safe assets) deleverage through negative net outflows of risky assets and positive net outflows of safe assets, experience a rise in the current account and a greater than average drop in risky asset prices.”

In and NBER working paper, Pablo Ottonello, Diego Perez, and Paolo Varraso consider the design of macroprudential policies based on quantitative collateral-constraint models. They find that “that the desirability of macroprudential policies critically depends on the specific form of collateral used in debt contracts.”

In ProMarket, Orkun Saka highlights his recent research on political effects in state-bank loan activity in Turkey. The findings suggest strategic lending close to local elections, relative to private banks.

In the NY Fed’s Liberty Street Economics, Nicola Cetorelli, Michael Jacobides, and Samuel Stern present research on the effects on performance of broader business activities taken on by bank holding companies (BHCs). They conclude that “expansion into activities when they are highly related to core banking seems to be beneficial for BHCs,” though they don’t rule out negative externalities.

In Liberty Street Economics, Haoyang Liu, David Lucca, Dean Parker, and Gabriela Rays-Wahba take a look at home value sensitivity to interest rates, finding that “home values are nowhere near as sensitive to interest rates as the user cost model predicts,” in line with prior research and suggesting low interest rates may be more crucial in determining levels of home construction and sales.

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By |2021-09-17T14:14:56-07:00September 17th, 2021|Blog, Financial Regulation|