Household Leverage and the Recession of 2007 to 2009
We show that household leverage as of 2006 is a powerful statistical predictor of the severity of the 2007 to 2009 recession across U.S. counties. Counties in the U.S. that [...]
Did Credit Market Policies Cause the Housing Bubble?
Many economists have argued that aspects of the credit market, including low interest rates, can explain the boom. The evidence summarized in this Policy Brief casts doubt on the view [...]
GSE Activity and Mortgage Supply in Lower-Income and Minority Neighborhoods: The Effect of the Affordable Housing Goals
I estimate the credit supply effect of the Underserved Areas Goal (UAG), which establishes GSE purchase goals for mortgages to lower-income and minority neighborhoods. Taking advantage of discontinuous census tract [...]
Adverse Selection, Reputation and Sudden Collapses in Secondary Loan Markets
Banks and financial intermediaries that originate loans often sell some of these loans or securitize them in secondary loan markets and hold on to others. New issuances in such secondary [...]
Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies
In this paper, we investigate whether U.S. bank holding companies (BHCs) with strong and independent risk management functions have lower enterprise-wide risk. We hand-collect information on the organizational structure of [...]
The Behavior of Intoxicated Investors: The role of institutional investors in propagating the crisis of 2007-2008
Using a novel data of institutional investors' bond holdings, we examine a transmission of the crisis of 2007-2008 from the securitized bond market to the corporate bond market via joint [...]
Financial Connections and Systemic Risk
We develop a model where institutions form connections through swaps of projects in order to diversify their individual risk. These connections lead to two different network structures. In a clustered [...]
The Role of Mortgage Brokers in the Subprime Crisis
Prior to the subprime crisis, mortgage brokers originated about 65% of all subprime mortgages. Yet little is known about their behavior during the runup to the crisis. Using data from [...]
Can Cheap Credit Explain the Housing Boom?
Between 1996 and 2006, real housing prices rose by 53 percent according to the Federal Housing Finance Agency price index. One explanation of this boom is that it was caused [...]
The Inefficiency of Clearing Mandates
In the aftermath of the financial crisis, attention has turned to reducing systemic risk in the derivatives markets. Much of this attention has focused on counterparty risk in the over-the-counter [...]