Speech At the "Fed Family" Luncheon at the Federal Reserve Bank of San Francisco, San Francisco, California
Speech At the Washington Policy Summit sponsored by Institute of International Finance, Washington, D.C.
Speech At the Financial Stability Board Roundtable on Reforming Major Interest Rate Benchmarks, Washington, D.C.
Speech At the "Fed Listens: Distributional Consequences of the Cycle and Monetary Policy" Conference hosted by the Opportunity and Inclusive Growth Institute, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota
Speech At the Conference of State Bank Supervisors, Washington, D.C.
Speech At the 2019 European Bank Executive Committee Forum "The Future of Banking: The Human Factor," Brussels, Belgium
Speech At "Strategic Approaches to the Fed's Balance Sheet and Communications" Spring 2019 Meeting of the Manhattan Institute's Shadow Open Market Committee, New York, New York
Speech At the Ag Lenders Conference, sponsored by The Independent Community Bankers Association of New Mexico, Deming, New Mexico
Speech At the "The Euro Area: Staying the Course through Uncertainties" BDF Symposium and 34th SUERF Colloquium sponsored by Banque de France and the European Money and Finance Forum, Paris, France
Speech At the Joint Conference of the European Central Bank and the Journal of Money, Credit, and Banking, Frankfurt, Germany
WASHINGTON – FINRA today announced the formation of an Office of Financial Innovation that will serve as a central point of coordination for issues related to significant financial innovations by FINRA member firms, particularly new uses of financial technology (fintech). The move will further enhance FINRA’s ability to identify, understand and foster financial innovation in the markets in a manner that strengthens investor protection and market integrity.
WASHINGTON — The Securities and Exchange Commission (SEC) and FINRA announced today the opening of registration for their 2019 National Compliance Outreach Program for Broker-Dealers, which will be held June 27, in Chicago, IL.
The program is designed to provide an open forum for regulators and industry professionals including compliance, audit and other senior personnel of broker-dealer firms and branch offices to discuss current compliance practices and promote an effective compliance structure for the protection of investors.
WASHINGTON, D.C. – To kickoff April as Financial Literacy Month, the FINRA Investor Education Foundation (FINRA Foundation) and the American Library Association (ALA) today announced the selection of 50 U.S. public libraries to be part of a national tour of the traveling exhibition, Thinking Money for Kids.
WASHINGTON — FINRA today filed with the U.S. Securities and Exchange Commission a proposal to expand its collection and dissemination of new-issue reference data for corporate bonds. The proposal calls for FINRA’s TRACE (Trade Reporting and Compliance Engine) to serve as a centralized source for market participants to receive more comprehensive and timely security description information about new issues.
WASHINGTON – FINRA announced today that it has fined Cantor Fitzgerald & Co. (Cantor) $2 million for Regulation SHO (Reg SHO) violations and supervisory failures spanning a period of at least five years. As part of the settlement, Cantor also agreed to retain an independent consultant to conduct a comprehensive review of the firm’s policies, systems, procedures and training related to Reg SHO.
WASHINGTON — Starting today, the FINRA Investor Education Foundation Military Spouse Fellowship is accepting applications for its 2019 class of financial FINRA Fellows — a unique program designed to increase the financial capability of U.S. service members and their families.
WASHINGTON –Institutional orders routed by brokers that send a relatively high percentage of such orders through affiliated alternative trading systems (ATSs) tend to receive lower order fill rates and higher execution costs, according to a new working paper by
The Securities and Exchange Commission today announced that Prosper Funding LLC will pay a $3 million penalty for miscalculating and materially overstating annualized net returns to retail and other investors.
San Francisco-based Prosper is a marketplace lender that, through its website, offers and sells securities linked to the performance of its consumer credit loans. According to the SEC's order, from approximately July 2015 until May 2017, Prosper excluded certain non-performing charged off loans from its calculation of annualized net returns that it reported to investors. The order finds that, as a result, Prosper reported overstated annualized net returns to more than 30,000 investors on individual account pages on Prosper's website and in emails soliciting additional investments from investors. Many investors decided to make additional investments based on the overstated annualized net returns. The order also finds that Prosper failed to identify and correct the error despite Prosper's knowledge that it no longer understood how annualized net returns were calculated and despite investor complaints about the calculation.
"For almost two years, Prosper told tens of thousands of investors that their returns were higher than they actually were despite warning signs that should have alerted Prosper that it was miscalculating those returns," said Daniel Michael, Chief of the SEC Enforcement Division's Complex Financial Instruments Unit. "As this case shows, we are committed to holding fintech companies to the same standards applicable to other participants in the securities markets."
Without admitting or denying the findings, Prosper consented to the entry of an SEC order finding that it violated the antifraud provision contained in Section 17(a)(2) of the Securities Act of 1933. In addition to the penalty, the SEC's order requires Prosper to cease and desist from future violations of Section 17(a) of the Securities Act.
The SEC's investigation was conducted by Jason Casey and Daniel Nigro of the Complex Financial Instruments Unit. Laura Metcalfe supervised the investigation.
The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) today announced the opening of registration for their 2019 National Compliance Outreach Program for Broker-Dealers, which will be held June 27, 2019, in Chicago.
The program is designed to provide an open forum for regulators and industry professionals including compliance, internal audit, and other senior personnel of broker-dealer firms and branch offices, to discuss current compliance practices and promote a more effective compliance structure for the protection of investors.
The SEC's Office of Compliance Inspections and Examinations (OCIE), in coordination with the SEC's Division of Trading and Markets, is sponsoring the program with FINRA. The program will be held at the Federal Reserve Bank of Chicago from 9 a.m. to 3 p.m. CT. The program will focus on insights from leadership, protecting retail investors, and regulatory hot topics such as digital assets and cybersecurity.
"We look forward to our continued engagement with industry professionals at this year’s National Compliance Outreach Program for Broker-Dealers," said Peter Driscoll, Director of OCIE. "This event is a valuable opportunity for us to share our thoughts and observations from recent examinations and to listen to the insights provided by experienced industry professionals about current market and regulatory risks."
"As our regulatory program evolves to meet the challenges of new markets, new products and new rules, FINRA engages with member firms, compliance leaders and other regulators in meaningful discussions that enrich our regulatory efforts and provide broker-dealers with the tools and information needed to better serve investors," said Mike Rufino, Executive Vice President and Head of FINRA Member Regulation—Sales Practice.
There is no cost to attend the event, but in-person attendance is limited to 250 on a first-come, first-served basis. There will be a maximum of four attendees per firm. For those that cannot attend, a live webcast will be available at http://www.sec.gov/news/otherwebcasts.shtml.
CPE, CRCP and CFP continuing education (CE) credits and a CLE voucher will be available to in-person attendees only.
For additional details on the 2019 National Compliance Outreach Program for Broker-Dealers, including the agenda and information on how to register for the event, visit the SEC’s website at http://www.sec.gov/info/complianceoutreach-bd.htm or FINRA’s website at http://www.finra.org/industry/2019-national-compliance-outreach-program-broker-dealers.
The Securities and Exchange Commission today announced that Sara Cortes and David P. Bartels have been named Deputy Chief Counsels of the Division of Investment Management. As Deputy Chief Counsels, Ms. Cortes and Mr. Bartels will join a leadership team and staff that are responsible for responding to requests for legal and policy guidance, evaluating applications for exemptive relief, coordinating international and legislative technical assistance, and running the division’s enforcement liaison program. Ms. Cortes will oversee the exemptive applications program and Mr. Bartels will oversee the enforcement liaison program. They will share responsibility for staff legal guidance by the Chief Counsel’s Office.
Ms. Cortes has been a member of the division’s Rulemaking Office since 2013, serving most recently as Assistant Director and head of the Investment Adviser Regulation Office. In that capacity, she has led the development of recommendations for rulemaking and other policy initiatives under the Advisers Act of 1940.
Mr. Bartels has served in a number of capacities in the Division of Investment Management, most recently as Senior Policy Advisor to Director Dalia Blass. His work has encompassed rulemaking, applications for exemptive relief, and requests for legal and policy guidance across diverse subjects under the Investment Company Act and the Advisers Act of 1940.
"I am excited for Sara and David to take on these new leadership roles. I have worked with both of them for many years and I am delighted that the Chief Counsel’s Office will benefit from their extensive experience, deep knowledge of the 1940 Acts and thoughtful leadership skills. They are highly respected by their peers and will be a fantastic addition to the division’s senior leadership team,” said Dalia Blass, Director of the Division of Investment Management.
“I have had the opportunity to work closely with both Sara and David since my return to the Commission. Each is an excellent lawyer with a breadth of experience and demonstrated good judgment. They will be tremendous assets to the important work of the Chief Counsel’s Office on behalf of investors,” said Paul G. Cellupica, Deputy Director and Chief Counsel of the Division of Investment Management.
"The staff of the Chief Counsel’s Office is remarkably talented, and it’s an honor to be part of such a dedicated team,” said Ms. Cortes and Mr. Bartels. “We’re excited about this opportunity to continue serving Main Street investors while working on the kinds of innovative requests that have helped make the U.S. asset management markets vibrant.”
Before joining the Division of Investment Management, Ms. Cortes was Counsel and Senior Adviser to Chairman Elisse Walter. She first joined the agency in the Legal Policy Group of the Office of General Counsel in 2009, advising the Commission on enforcement matters. In 2017, Ms. Cortes received the Commission’s Exceptional Service Award for her leadership on the Commission’s Investment Company Reporting Modernization initiative. Prior to joining the SEC, Ms. Cortes was Counsel in the Legal Division of the Board of Governors of the Federal Reserve System as an enforcement and litigation attorney. Ms. Cortes began her legal career in private practice at Cleary Gottlieb Steen & Hamilton LLP. Ms. Cortes earned her J.D. and Master of Science of Foreign Service, magna cum laude, from Georgetown University and her bachelor’s degree in international studies and French from Rhodes College in Memphis, Tennessee.
Mr. Bartels joined the division in 2010, starting in the Investment Adviser Regulation Office, where he received the Commission’s Law and Policy Award for work on private fund adviser reporting. Mr. Bartels was Branch Chief in the Exemptive Applications and Chief Counsel’s Offices from 2011-2016, focusing on exchange-traded funds, business development companies, funds of funds, and affiliated transactions. Mr. Bartels also served as counsel to Commissioner Kara M. Stein, advising on a wide range of matters under the federal securities laws and supporting the Commission’s Diversity Council. Prior to joining the Division, Mr. Bartels worked in the corporate practice at Sullivan & Cromwell LLP, where he advised clients on securities offerings, mergers and acquisitions, and other corporate transactions. Mr. Bartels received his law degree from Yale Law School and his bachelor’s degree from SUNY Buffalo.
The Securities and Exchange Commission today charged two former directors of investments at Woodbridge Group of Companies LLC for their roles in its massive Ponzi scheme. The defendants, California-based Ivan Acevedo and Dane R. Roseman, were separately arrested and charged by criminal authorities, along with Woodbridge owner Robert H. Shapiro.
The SEC previously charged Woodbridge and Shapiro, and Woodbridge’s highest-earning unregistered brokers. In January, a federal court in Florida ordered Woodbridge, related companies, and Shapiro together to pay $1 billion for operating this Ponzi scheme.
According to the SEC’s complaint, although Acevedo and Roseman were not registered in any capacity with the SEC, they were responsible for fraudulently raising at least $1.2 billion from more than 8,400 retail investors, many of them seniors, and together received more than $3 million in transaction-based and other compensation.
The complaint, filed in U.S. District Court for the Southern District of Florida, alleges that Acevedo oversaw Woodbridge’s fundraising for Woodbridge’s securities from 2012 until his departure in 2015, when he was succeeded by Roseman. According to the complaint, the defendants were responsible for hiring and training Woodbridge’s sales force, approved fraudulent marketing materials and sales scripts, and helped create the false appearance that Woodbridge was a legitimate operation when in reality it was a Ponzi scheme that used money from new investors to pay existing investors.
“Instead of telling investors the truth – that Woodbridge’s third-party lending business was a sham almost from inception – we allege that Acevedo and Roseman worked diligently to perpetuate this sham by preparing and disseminating false marketing materials to induce more investments, keeping this massive Ponzi scheme afloat,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “The SEC is committed to continue to hold responsible parties accountable in this far-reaching scheme.”
The SEC’s complaint charges Acevedo and Roseman with violating the securities registration, broker-dealer registration, and anti-fraud provisions of the federal securities laws, and seeks disgorgement of allegedly ill-gotten gains, with interest, and financial penalties.
The SEC’s investigation, which is continuing, was conducted by Scott A. Lowry, Russell Koonin, Christine Nestor, and Mark Dee in the Miami Regional Office, with assistance from David Baddley, and supervised by Jason R. Berkowitz, Fernando Torres, Thierry Olivier Desmet, and Glenn Gordon. The litigation will be led by Ms. Nestor and Mr. Koonin under the supervision of Andrew O. Schiff. The SEC appreciates the assistance of the Florida Office of Financial Regulation, the U.S. Attorney’s Office for the Southern District of Florida, the Miami field office of the Federal Bureau of Investigation, and the Internal Revenue Service, Criminal Investigations.
The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert to help seniors identify signs of investment fraud and, in conjunction with the Division of Enforcement’s Retail Strategy Task Force, another Investor Alert about Ponzi schemes targeting seniors. The SEC strongly encourages investors to use the agency’s Investor.gov website to check the backgrounds of people selling them investments to quickly identify whether they are registered professionals.
The Securities and Exchange Commission today released the agenda for the April 15 meeting of the Fixed Income Market Structure Advisory Committee. The Commission established the advisory committee to provide a formal mechanism through which the Commission can receive advice and recommendations on fixed income market structure issues.
The meeting will be held at the SEC’s headquarters at 100 F Street, N.E., Washington, D.C., and is open to the public. The meeting will be webcast live on the SEC’s website, SEC.gov, and will be archived on the website for later viewing.
Members of the public who wish to provide their views on the matters to be considered by the Fixed Income Market Structure Advisory Committee may submit comments either electronically or on paper, as described below. Please submit comments using one method only. Information that is submitted will become part of the public record of the meeting.
Electronic submissions:
Use of the SEC’s Internet submission form or send an e-mail to rule-comments@sec.gov.
Paper submissions:
Send paper submissions in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1090.
All submissions should refer to File Number 265-30, and the file number should be included on the subject line if e-mail is used.
* * *
Agenda April 15, 2019
9:30 a.m. Welcome and Opening Remarks
9:45 a.m. Presentation on Block Pilot and Reference Data Service Proposal
10:30 a.m. Draft Recommendation on Pennying in the Corporate Bond and Municipal Securities Markets
11:30 a.m. Break
11:45 a.m. Draft Recommendations on Certain Principal Transactions with Advisory Clients
12:45 p.m. Lunch Break
1:30 p.m. Updates from the Credit Ratings, ETFs and Bond Funds, and Corporate Bond Transparency Subcommittees
2:15 p.m. LIBOR Transition: Implications for the Corporate Bond and Municipal Securities Markets
3:30 p.m. Adjournment
The Securities and Exchange Commission today charged a former senior lawyer at SeaWorld Entertainment Inc. with insider trading based on nonpublic information that the company’s revenue would be better than anticipated for the second quarter of 2018.
The SEC alleges that Paul B. Powers had early access to key revenue information as the company’s associate general counsel and assistant secretary, and he purchased 18,000 shares of SeaWorld stock the day after he received a confidential draft of the 2018 second quarter earnings release that detailed a strong financial performance by the company after a lengthy period of decline. According to the SEC’s complaint, Powers immediately sold his SeaWorld shares for approximately $65,000 in illicit profits after the company announced its positive earnings and the company’s stock price increased by 17 percent.
“As alleged in our complaint, Powers blatantly exploited his access to nonpublic information by misusing SeaWorld’s confidential revenue data to enrich himself,” said Kurt Gottschall, Director of the SEC’s Denver Regional Office. “Investors should feel confident in the integrity of corporate officers, particularly attorneys. The SEC is committed to swiftly pursuing insiders who breach their duties to investors.”
The SEC’s complaint, filed in federal district court in Orlando, Florida, charges Powers with fraud. Powers has consented to a permanent injunction with the amounts of disgorgement and penalties, if any, to be decided by the court. The settlement is subject to court approval.
In a parallel action, the U.S. Department of Justice today announced criminal charges against Powers arising out of the same conduct.
The SEC’s investigation was conducted by L. James Lyman and supervised by Ian Karpel and Mr. Gottschall of the Denver office. The litigation will be handled by Stephen McKenna. The SEC appreciates the assistance of the U.S. Department of Justice and the U.S. Department of Homeland Security.
Federal Reserve Board invites public comment on proposal to simplify and increase the transparency of rules for determining control of a banking organization
Agencies seek comment on revisions to the supplementary leverage ratio as required by Economic Growth, Regulatory Relief, and Consumer Protection Act
Federal Reserve Board announces termination of enforcement action with BB&T Corporation
Agencies invite comment on modifications to resolution plan requirements; proposal keeps existing requirements for largest firms and reduces requirements for firms with less risk
Minutes of the Board's discount rate meetings from February 25 through March 20, 2019
Federal Reserve Board issues enforcement action with Princeton Capital Holdings LLC, Princeton Capital LLC, and Princap Holdings One LLC
Federal Reserve fines UniCredit $158 million for firm's unsafe and unsound practices related to inadequate sanctions controls and supervision of subsidiary banks
Federal Reserve Board publishes transcripts of more than 50 interviews with former policymakers and former senior staff that chronicle nearly half a century of Federal Reserve history
Minutes of the Federal Open Market Committee, March 19-20, 2019
Federal Reserve Board fines Standard Chartered $164 million for firm's unsafe and unsound practices relating to inadequate sanctions controls and failure to disclose sanctions risks to the Federal Reserve
The Work Plan presents the audits and evaluations we are conducting to help the Board and the Bureau fulfill their respective missions.
Workforce planning helps to address gaps between today's workforce and tomorrow's human capital needs. In light of the Board's level of retirement-eligible workers and its need for a workforce with specialized skills, we evaluated the Board's . . .
The Dodd-Frank Act authorizes the Bureau to supervise all depository institutions with more than $10 billion in total assets and their affiliates, along with thousands of nondepository institutions. The agency seeks to prioritize its examination . . .
NEW ORLEANS – The United States Attorney's Office announced that GREGORY ST. ANGELO ("ST ANGELO"), age 54, a resident of St. Tammany Parish, was charged today with conspiracy to defraud First NBC Bank, the New Orleans-based bank that failed in April ...
We contracted with an independent public accounting firm to audit the financial statements of the Board as of and for the years ended December 31, 2018 and 2017, and to audit the Board's internal control over financial reporting as of December . . .
The Board performs the accounting function for the Federal Financial Institutions Examination Council, and we contracted with an independent public accounting firm to audit the FFIEC's financial statements as of and for the years ended December 31 . . .
Bureau travel cards were used for 55,059 transactions totaling some $11.8 million in fiscal year 2018. We analyzed the risks of illegal, improper, or erroneous purchases and payments.
Organizational governance involves processes and structures for decisionmaking, accountability, controls, and behaviors designed to accomplish an organization's objectives. A strong governance system can enable an organization to achieve its objectives
During examinations of supervised institutions, the Bureau may issue corrective actions to address violations of federal consumer financial laws or regulations, compliance program deficiencies, or control weaknesses. We assessed the Bureau's . . .
An Open Board meeting of the Board of Governors of the Federal Reserve System was held at 10:00 a.m. on April 8, 2019. Matter(s) considered: Proposed rules on prudential standards for foreign banking organizations and resolution plan requirements for foreign and domestic banking organizations.
A closed meeting of the Board of Governors of the Federal Reserve System will be held at 11:30 a.m. on February 25, 2019. Matter(s) considered: Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.
A closed meeting of the Board of Governors of the Federal Reserve System was held at 1:00 p.m.on February 21, 2019. Matter(s) considered: Periodic Briefing and Discussion on Financial Markets, Institutions, and Infrastructure. Bank Supervisory Matter.
Pablo Cuba-Borda, Luca Guerrieri, Matteo Iacoviello, and Molin Zhong | Applied researchers interested in estimating key parameters of DSGE models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspeci cation, related to the treatment of measurement errors, can interact and compound each other.
Friederike Niepmann and Tim Schmidt-Eisenlohr | This paper documents that an appreciation of the U.S. dollar is associated with a reduction in the supply of commercial and industrial loans by U.S. banks. An increase in the broad dollar index by 2.5 points (one standard deviation) reduces U.S. banks' corporate loan originations by 10 percent. This decline is driven by a reduction in the demand for loans on the secondary market where prices fall and liquidity worsens when the dollar appreciates, with stronger effects for riskier loans. Today, the main buyers of U.S. corporate loans--and, hence, suppliers of funding for these loans--are institutional investors, in particular mutual funds, which experience outflows when the dollar appreciates. A shift of traditional financial intermediation to these relatively unregulated entities, which are more sensitive to global developments, has led to the emergence of this new channel through which the dollar affects the U.S. economy, which we term the secondary market channel.
Antonio Álvarez, Alejandro Fernandez, Joaquin Garcia-Cabo, and Diana Posada | This study attempts to evaluate the impact of an increase in banks' funding stress and its transmission to the real economy, taking into account different funding sources banks can rely on. Using aggregate data from eight Euro area financial systems, we find that following a liquidity funding shock, both credit and GDP decline in different amounts and lengths. GDP reverts faster than credit. Furthermore, periphery countries experience a more pronounced fall in deposits and credit growth and the negative effects from the shock last longer than in core countries. Banks' funding seems to play a relevant role as periphery countries rely more on wholesale funding during normal times.
Richard Clarida | This paper highlights some of the theoretical and practical implications for monetary policy and exchange rates that derive specifically from the presence of a global general equilibrium factor embedded in neutral real policy rates in open economies. Using a standard two country DSGE model, we derive a structural decomposition in which the nominal exchange rate is a function of the expected present value of future neutral real interest rate differentials plus a business cycle factor and a PPP factor. Country specific "r*" shocks in general require optimal monetary policy to pass these through to the policy rate, but such shocks will also have exchange rate implications, with an expected decline in the path of the real neutral policy rate reflected in a depreciation of the nominal exchange rate. We document a novel empirical regularity between the equilibrium error in the VECM representation of the empirical Holston Laubach Williams (2017) four country r* model and the value of the nominal trade weighted dollar. In fact, the correlation between the dollar and the 12 quarter lag of the HLW equilibrium error is estimated to be 0.7. Global shocks to r* under optimal policy require no exchange rate adjustment because passing though r* shocks to policy rates 'does all the work' of maintaining global equilibrium. We also study a richer model with international spill overs so that in theory there can be gains to international policy cooperation. In this richer model we obtain a similar decomposition for the nominal exchange rate, but with the added feature that r* in each country is a function global productivity and business cycle factors even if these factors are themselves independent across countries. We argue that in practice, there could well be significant costs to central bank communication and credibility under a regime of formal policy cooperation, but that gains to policy coordination could be substantial given that r*'s are unobserved but are correlated across countries.
Serafin J. Grundl and You Suk Kim | The U.S. government guarantees a majority of residential mortgages, which is often justified as a means to promote homeownership. In this paper we use property-level data to estimate the effect of government mortgage guarantees on homeownership, by exploiting variation of the conforming loan limits (CLLs) along county borders. We find substantial effects on government guarantees, but find no robust effect on homeownership. This finding suggests that government guarantees could be considerably reduced with modest effects on homeownership, which is relevant for housing finance reform plans that propose to reduce the government's involvement in the mortgage market by reducing the CLLs.
Francesca Loria, Christian Matthes, and Donghai Zhang | What drives macroeconomic tail risk? To answer this question, we borrow a definition of macroeconomic risk from Adrian et al. (2019) by studying (left-tail) percentiles of the forecast distribution of GDP growth. We use local projections (Jordà, 2005) to assess how this measure of risk moves in response to economic shocks to the level of technology, monetary policy, and financial conditions. Furthermore, by studying various percentiles jointly, we study how the overall economic outlook--as characterized by the entire forecast distribution of GDP growth--shifts in response to shocks. We find that contractionary shocks disproportionately increase downside risk, independently of what shock we look at.
Horacio Sapriza and Judit Temesvary | We study the relationship between the strength of the bank credit channel (BCC) of monetary policy and real GDP growth in the United States using quarterly commercial bank level data between 1986 and 2008. We find that the BCC was significantly stronger during periods of low economic growth. Monetary policy is more effective through this channel in spurring economic activity during periods of low growth, rather than in cooling the economy when growth is high. Furthermore, we find that the BCC operated through a broader range of loan categories and banks than previously documented, underscoring this channel's economic relevance.
Travis J. Berge and Damjan Pfajfar | We produce business cycle chronologies for U.S. states and evaluate the factors that change the probability of moving from one phase to another. We find strong evidence for positive duration dependence in all business cycle phases but find that the effect is modest relative to other state- and national-level factors. Monetary policy shocks also have a strong influence on the transition probabilities in a highly asymmetric way. The effect of policy shocks depends on the current state of the cycle as well as the sign and size of the shock.
Rochelle M. Edge and J. Nellie Liang | We evaluate the institutional frameworks developed to implement time-varying macroprudential policies in 58 countries. We focus on new financial stability committees (FSCs) that have grown dramatically in number since the global financial crisis, and their interaction with central banks, and infer countries' revealed preferences for effectiveness versus political economy considerations. Using cluster analysis, we find that only one-quarter of FSCs have both good processes and good tools to implement macroprudential actions, and that instead most FSCs have been designed to improve communication and coordination among existing regulators. We also find that central banks are not especially able to take macroprudential actions when FSCs are not set up to do so. We conclude that about one-half of the countries do not have structures to take or direct actions and avoid risks of policy inertia. Rather countries' decisions appear to be consistent with strengthening the politica l legitimacy of macroprudential policies with prominent roles for the ministry of finance and avoiding placing additional powers in central banks that already are strong in microprudential supervision and have high political independence for monetary policy. The evidence suggests that countries are placing a relatively low weight on the ability of policy institutions to take action and a high weight on political economy considerations in developing their financial stability governance structures.
Yiwei Dou, Geng Li, and Joshua Ronen | We study the unintended consequences of consumer financial regulations, focusing on the CARD Act, which restricts consumer credit card issuers' ability to raise interest rates. We estimate the competitive responsiveness--the degree to which a credit card issuer changes offered interest rates in response to changes in interest rates offered by its competitors--as a measure of competition in the credit card market. Using small business card offers, which are not subject to the Act, as a control group, we find a significant decline in the competitive responsiveness after the Act. The decline in responsiveness is more pronounced for competitors' reductions, as opposed to increases, in interest rates, and is more pronounced in areas with more subprime borrowers. The reduced competition underscores the potential unintended consequence of regulating the consumer credit market and contributes toward a more comprehensive and balanced evaluation of the costs and benefits of consumer financial regulations.
Yang-Ho Park | Using positions data on bond futures, I document that speculators' spread trades contain private information about future economic activities and asset prices. Strong steepening trades are associated with negative payroll surprises in subsequent months and can predict asset markets' reaction to future payroll releases, suggesting that speculators hold superior information about future payrolls. Steepening trades can also predict the rise of stock prices within a few hours before subsequent FOMC announcements, implying that the pre-FOMC stock drift is driven by informed speculation. Overall, evidence highlights spread traders' superior information and its important role in explaining announcement returns and pre-announcement drifts.
Gianni Amisano and Oreste Tristani | We study the relationship between monetary policy and long-term rates in a structural, general equilibrium model estimated on both macro and yields data from the United States. Regime shifts in the conditional variance of productivity shocks, or "uncertainty shocks", are an important model ingredient. First, they account for countercyclical movements in risk premia. Second, they induce changes in the demand for precautionary saving, which affects expected future real rates. Through changes in both risk-premia and expected future real rates, uncertainty shocks account for about 1/2 of the variance of long-term nominal yields over long horizons. The remaining driver of long-term yields are changes in in ation expectations induced by conventional, autoregressive shocks. Long-term in ation expectations implied by our model are in line with those based on survey data over the 1980s and 1990s, but less dogmatically anchored in the 2000s.Appendix(PDF)
Tim Dore and Traci Mach | In 2005, Prosper launched the first peer-to-peer lending website in the US, allowing for consumers to apply for and receive loans entirely online. To understand the effect of this new credit source, we match application-level data from Prosper to credit bureau data. Post application, borrowers' credit scores increase and their credit card utilization rates fall relative to non-borrowers in the short run. In the longer run, total debt levels for borrowers are higher that of non-borrowers. Differences in mortgage debt are particularly large and increasing over time. Despite increased debt levels relative to non-borrowers, delinquency rates for borrowers are significantly lower.
Cynthia L. Doniger | I document a disparity in the cyclicality of the allocative wage-the labor costs considered when deciding to form or dissolve an employment relationship-across levels of educational attainment. Specifically, workers with a bachelors degree or more exhibit an allocative wage that is highly pro-cyclical while high school dropouts exhibit no statistically discernible cyclical pattern. I also assess the response to monetary policy shocks of both employment and allocative wages across education groups. The less educated respond to monetary policy shocks on the employment margin while the more educated respond on the wage margin. An important takeaway is that conventional monetary policy easing reduces employment inequality but increases wage inequality. I embed these findings in a New Keynesian framework that includes price and heterogeneous wage rigidity and show that heterogeneity results in welfare losses due to fluctuations that exceed those of the output-gap and p rice-level equivalent representative agent economy. The excess welfare loss is borne by the least educated.
This paper was modified on April 3, 2019, to correct a typo in Equation 6.6.
Michael M. Batty, Jesse Bricker, Joseph S. Briggs, Elizabeth Holmquist, Susan Hume McIntosh, Kevin B. Moore, Eric R. Nielsen, Sarah Reber, Molly Shatto, Kamila Sommer, Tom Sweeney, and Alice Henriques Volz | This paper describes the construction of the Distributional Financial Accounts (DFAs), a new dataset containing quarterly estimates of the distribution of U.S. household wealth since 1989, and provides the first look at the resulting data. The DFAs build on two existing Federal Reserve Board statistical products --- quarterly aggregate measures of household wealth from the Financial Accounts of the United States and triennial wealth distribution measures from the Survey of Consumer Finances --- to incorporate distributional information into a national accounting framework. The DFAs complement other existing sources of data on the wealth distribution by using a more comprehensive measure of household wealth and by providing quarterly data on a timely basis. We encourage policymakers, researchers, and other interested parties to use the DFAs to help understand issues related to the distribution of U.S. household wealth.
Kartik Athreya, Felicia F. Ionescu, Urvi Neelakantan, and Ivan Vidangos | A first glance at US data suggests that college -- given its mean returns and sharply subsidized cost for all enrollees -- could be of great value to most. Using an empirically-disciplined human capital model that allows for variation in college readiness, we show otherwise. While the top decile of valuations is indeed large (40 percent of consumption), nearly half of high school completers place zero value on access to college. Subsidies to college currently flow to those already best positioned to succeed and least sensitive to them. Even modestly targeted alternatives may therefore improve welfare. As proof of principle, we show that redirecting subsidies away from those who would nonetheless enroll -- towards a stock index retirement fund for those who do not even when college is subsidized -- increases ex-ante welfare by 1 percent of mean consumption, while preserving aggregate enrollment and being budget neutral.
Erik A. Heitfield and Yang-Ho Park | The Alternative Reference Rate Committee, a group of private-sector market participants convened by the Federal Reserve, has recommended that markets transition to the use of the Secured Overnight Financing Rate (SOFR) in financial contracts that currently reference US dollar LIBOR. This paper examines the feasibility of using SOFR futures prices to construct forward-looking term reference rates that are conceptually similar to the term LIBOR rates commonly used in loan contracts. We show that futures-implied term SOFR rates have closely tracked federal funds OIS rates over the eight months since SOFR futures began trading. To examine the performance of our approach over a longer time horizon, we compare term rates derived from federal funds futures with observed overnight rates and OIS rates from 2000 to the present. Consistent with prior research, we find that futures-implied term rates accurately predict realized compounded overnight rates during most periods.
Eric C. Engstrom, Steven A. Sharpe | The spread between the yield on a 10-year Treasury note and the yield on a shorter maturity security, such as a 2-year Treasury note, is commonly used as an indicator for predicting U.S. recessions. We show that such "long-term spreads" are statistically dominated in models that predict recessions or GDP growth by an economically more intuitive alternative, a "near-term forward spread." The latter can be interpreted as a measure of the market's expectations for the near-term trajectory of conventional monetary policy rates. Its predictive power suggests that, when market participants expected—and priced in—a monetary policy easing over the subsequent year and a half, a recession was quite likely in the offing. We also find that the near-term spread predicts four-quarter GDP growth with greater accuracy than survey consensus forecasts and that it has substantial predictive power for stock returns. Yields on bonds maturing beyond 6-8 quarters are shown to have no added value for forecasting either recessions, GDP growth, or stock returns.
Revised paper: Accessible materials (.zip)
Original paper: PDF | Accessible materials (.zip)
David M. Byrne, Daniel E. Sichel, and Ana Aizcorbe | This paper addresses two measurement issues for mobile phones. First, we develop a new mobile phone price index using hedonic quality-adjusted prices for smartphones and a matched-model index for feature phones. Our index falls at an average annual rate of 17 percent during 2010-2018, close to the rate of decline in the price index used in the GDP Accounts. Given relatively flat average prices over this period, our index points to substantial quality improvement. Second, we propose a methodology to disentangle purchases of phones and wireless services when they are bundled together as part of a long-term service contract. Getting the allocation right is especially important for real PCE because the price deflators for phones and wireless services exhibit very different trends. Our adjusted estimates suggest that real PCE spending currently captured in the category Cellular Phone Services increased 4 percentage points faster than is reflected in published data.
Nathan Foley-Fisher, Stefan Gissler, and Stéphane Verani | This paper studies how over-the-counter market liquidity is affected by securities lending. We combine micro-data on corporate bond market trades with securities lending transactions and individual corporate bond holdings by U.S. insurance companies. Applying a difference-in-differences empirical strategy, we show that the shutdown of AIG's securities lending program in 2008 caused a statistically and economically significant reduction in the market liquidity of corporate bonds predominantly held by AIG. We also show that an important mechanism behind the decrease in corporate bond liquidity was a shift towards relatively small trades among a greater number of dealers in the interdealer market.
Pablo A. Cuba-Borda and Sanjay R. Singh | We theoretically explore long-run stagnation at the zero lower bound in a representative agent framework. We analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for changes in government spending, supply shocks and neo-Fisherian policies. On the other hand, a minimum wage policy is expansionary and robust to the source of stagnation. Using Bayesian methods, we estimate a DSGE model that can accommodate two competing hypotheses of long-run stagnation in Japan. We document that equilibrium selection under indeterminacy matters in accounting for model fit.
The New York Fed will incorporate selected deposits into the daily calculation of the Overnight Bank Funding Rate (OBFR) from May 2, 2019, reflecting underlying transactions from May 1, 2019.
Federal Reserve Banks’ Small Business Report Finds Strong Revenue and Employment Growth with Profitability Similar to Prior Year; Financing Demand Stable, Requests to Online Lenders Notably Increasing
The New York Fed’s Center for Microeconomic Data released the March 2019 Survey of Consumer Expectations, which shows no change in the short-term inflation expectations and a slight increase in medium-term inflation expectations. Home price change expectations remain at their lowest level, while expected earnings and household income expectations improved slightly.
Due to the Securities Industry and Financial Markets Association’s recommended market close on Friday, April 19, 2019, Good Friday will be widely treated as a holiday in the repo market, and there will be no publication of the Secured Overnight Financing Rate, the Broad General Collateral Rate, or the Tri-Party General Collateral Rate on that day.
Due to the Securities Industry and Financial Markets Association’s recommended market close on Friday, April 19, 2019, all reverse repurchase agreement and securities lending trades executed on Thursday, April 18 will mature on Monday, April 22, 2019.
The New York Fed's Open Market Trading Desk concluded the small value dollar roll exercise.
The New York Fed’s Center for Microeconomic Data released the February 2019 Survey of Consumer Expectations, which shows a decline in the short- and medium-term inflation expectations.
In March 2019, the Federal Reserve Bank of New York (New York Fed) Open Market Trading Desk will begin a process to streamline the administration of some of the Ginnie Mae-issued mortgage-backed securities held in the System Open Market Account through a service offered by Ginnie Mae called CUSIP aggregation.
Survey Shows an Increase in Year-Ahead Household Spending Expectations.
Auto Loan Balances Continue Rising; Younger Borrowers Struggle With Auto Debt Delinquencies.
Total commercial paper outstanding
Nonfinancial domestic commercial paper outstanding
Nonfinancial foreign commercial paper outstanding
Financial domestic commercial paper outstanding
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Asset-backed commercial paper outstanding
30-day AA asset-backed commercial paper rate
Overnight AA nonfinancial commercial paper rate
30-day AA nonfinancial commercial paper rate
Overnight A2/P2 nonfinancial commercial paper rate
30-day A2/P2 nonfinancial commercial paper rate
Overnight AA financial commercial paper rate
30-day AA financial commercial paper rate
Overnight AA asset-backed commercial paper rate
5-year inflation indexed Treasury constant maturity
4-week Treasury bill
3-month Treasury bill
7-year inflation indexed Treasury constant maturity
6-month Treasury bill
10-year inflation indexed Treasury constant maturity
1-year Treasury bill
20-year inflation indexed Treasury constant maturity
1-month Treasury constant maturity
30-year inflation indexed Treasury constant maturity
