We consider the business strategy of some banks that provide relationship loans (where they have loan origination and monitoring advantages relative to capital markets) with core deposit funding (where they can pass along the benefit of a sticky price on deposits). These quot;traditional...

This paper considers the role of Federal Home Loan Bank (FHLB) advances in stabilizing their commercial bank members' residential mortgage lending activities. Our theoretical model shows that using mortgage-related membership criteria or requiring mortgage-related collateral does not ensure that...

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that purchase mortgages and issue mortgage-backed securities (MBS). In addition, the GSEs are active participants in the primary and secondary mortgage markets on behalf of their own portfolios of MBS. Because these...

Governments use monetary policies to counteract the effects of financial crises. In this paper we examine the subsidy that such quot;safety netquot; policies provide to the banking industry. Using a model of uncertainty-driven financial crises, we show that any monetary policy designed to...

The Community Reinvestment Act (CRA) requires lenders quot;to help meet the credit needs of the local communities in which they are chartered, consistent with the safe and sound operation of such institutions.quot; For proponents of efficient markets, the CRA is a threat to lender profitability....

The return on assets depends on the joint behavior of all savers; if all sell the asset simultaneously then there will be a financial quot;Armageddon.quot; We assume that risk-neutral savers' information about aggregate investment is too vague to form precise probability estimates, so that they...

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that securitize mortgages and issue mortgage-backed securities (MBS). In addition, the GSEs are active participants in the secondary mortgage market on behalf of their own investment portfolios. Because these portfolios have...

This paper develops a model of the interactions between borrowers, originators, and a securitizer in primary and secondary mortgage markets. In the secondary market, the securitizer adds liquidity and plays a strategic game with mortgage originators. The securitizer sets the price at which it...

This paper develops a model of the interactions between borrowers, originators, and a securitizer in primary and secondary mortgage markets. In the secondary market, the securitizer adds liquidity and plays a strategic game with mortgage originators. The securitizer sets the price at which it...

Because illiquid bonds may be relatively poorly priced, the ability to infer investor perceptions of changes in a banking organization's financial health from such bonds may be obscured. To examine the time-series effect of trading frequency on subordinated debt spreads, we consider the...