scholarly journals Holes in the Dike: The Global Savings Glut, U.S. House Prices, and the Long Shadow of Banking Deregulation

2019 ◽  
Vol 18 (4) ◽  
pp. 2013-2055 ◽  
Author(s):  
Mathias Hoffmann ◽  
Iryna Stewen
Keyword(s):  
Value At Risk ◽  
House Prices ◽  
Housing Prices ◽  
The United States ◽  
Mortgage Lending ◽  
Capital Inflows ◽  
Banking Deregulation ◽  
Financial Deregulation ◽  
Interstate Banking ◽  
Boom And Bust

Abstract We show how capital inflows into and financial deregulation within the United States interacted in driving the recent boom and bust in U.S. housing prices. Interstate banking deregulation during the 1980s cast a long shadow: in states that opened their banking markets to out-of-state banks earlier, house prices were more sensitive to aggregate U.S. capital inflows during 1997–2012. Capital inflows relaxed the value-at-risk constraints of geographically diversified (“integrated”) U.S. banks more than those of local banks. Therefore, integrated banks absorbed a larger share of capital inflows and expanded mortgage lending more. This drove up housing prices.

The Debts that Bind Us: A Comparison of Amazonian Debt-Peonage and U.S. Mortgage Practices

2011 ◽  
Vol 53 (2) ◽  
pp. 344-370 ◽  
Author(s):  
Evan Killick
Keyword(s):  
United States ◽  
Financial Institutions ◽  
Global Financial Crisis ◽  
House Prices ◽  
Housing Prices ◽  
The United States ◽  
Credit Default Swaps ◽  
Mortgage Lending ◽  
Credit Default ◽  
Downward Spiral

Three years after the global financial crisis started academic and popular publications assessing its origins, consequences and wider implications are starting to emerge. The origins of the crisis are generally explained as stemming from the rapid increase in subprime mortgage lending in the United States and the credit default swaps banks and other financial institutions traded amongst themselves based on these loans. As homeowners found it increasingly difficult to make their repayments and housing prices in the United States started to drop, a downward spiral ensued. In this cycle ever-growing numbers of homeowners defaulted on their mortgages, unable to meet interest payments or to re-mortgage, and banks foreclosed on the houses even as their own assets and investments were exposed to the losses stemming from defaulted mortgages. With the foreclosures devaluing house prices further and the exposure of banks making them less willing and able to refinance mortgages, the situation quickly spiraled downwards. The complex global trade in credit default swaps and other derivatives meant that the problems were amplified and spread beyond the United States until ultimately many national governments decided to intervene with financial assistance mainly aimed at the financial institutions.

A Symposium on the Subprime Crisis

2009 ◽  
Vol 8 (3) ◽  
pp. 341-345 ◽  
Author(s):  
Dan Immergluck
Keyword(s):  
The United States ◽  
Mortgage Lending ◽  
Mortgage Market ◽  
Subprime Crisis ◽  
Risk Capital ◽  
Subprime Mortgage ◽  
Financial Deregulation ◽  
Community Reinvestment ◽  
Vertical Disintegration ◽  
Mortgage Crisis

The subprime crisis in mortgage lending and the resulting wave of foreclosures have been hitting cities and communities all over the United States. First, Dan Immergluck argues that there are three main elements in the financial crisis: (1) the vertical disintegration of the mortgage market and the related securitization; (2) financial deregulation; and (3) the burgeoning supply of high–risk capital. Second, Manuel Aalbers counters the view that the Community Reinvestment Act (CRA) and the associated community reinvestment movement can be blamed for the subprime mortgage crisis. He lists five reasons why the CRA is not guilty. Third and finally, Peter Marcuse sees the subprime crisis as a result of the underlying economic system. He argues that the private sector should not be viewed as the appropriate means of providing housing. He discusses a number of proposals that impact on the crisis and its roots.

New Mortgage Lenders and the Housing Market*

2020 ◽  
Author(s):  
Nikodem Szumilo
Keyword(s):  
Risk Taking ◽  
Financial Stability ◽  
House Prices ◽  
Housing Prices ◽  
Real Estate Market ◽  
Mortgage Lending ◽  
Mortgage Market ◽  
The Real Estate ◽  
Banking Market ◽  
The Real Estate Market

Abstract This article examines the effect of a new lender’s entry into a local mortgage market on the supply of new loans, housing prices and repossessions in areas around its branches. I use the decision of the European Commission to force the UK’s largest retail bank to divest a part of its business as a shock to the entry of a new lender, and show that incumbent banks increase mortgage lending in areas where the new bank has its branches. Furthermore, house prices increase by around 5% in the real estate market impacted by the shock. Average transaction numbers and mortgage repossession rates also increase in places where the new bank enters. Overall, my results show that increased competition in the banking market can have adverse consequences for risk-taking and financial stability.

A Macroeconomic Model of Price Swings in the Housing Market

2019 ◽  
Vol 109 (6) ◽  
pp. 2036-2072 ◽  
Author(s):  
Carlos Garriga ◽  
Rodolfo Manuelli ◽  
Adrian Peralta-Alva
Keyword(s):  
Financial Markets ◽  
House Prices ◽  
Housing Prices ◽  
The United States ◽  
Housing Finance ◽  
Macroeconomic Model ◽  
Quantitative Version ◽  
House Values ◽  
Mortgage Rates ◽  
Positive Effect

This paper shows that a macro model with segmented financial markets can generate sizable movements in housing prices in response to changes in credit conditions. We establish theoretically that reductions in mortgage rates always have a positive effect on prices, whereas the relaxation of loan-to-value constraints has ambiguous effects. A quantitative version of the model under perfect foresight accounts for about one-half of the observed price increase in the United States in the 2000s. When we include shocks to expectations about housing finance conditions, the model’s ability to match house values improves significantly. The framework reconciles the observed disconnect between house prices and rents since, in general equilibrium, financial shocks can decrease rents and increase prices. (JEL E44, G21, R31)

Bank Geographic Diversification and Systemic Risk

2019 ◽  
Vol 33 (10) ◽  
pp. 4811-4838 ◽  
Author(s):  
Yongqiang Chu ◽  
Saiying Deng ◽  
Cong Xia
Keyword(s):  
Systemic Risk ◽  
Value At Risk ◽  
Financial Integration ◽  
Causal Effect ◽  
Conditional Value At Risk ◽  
Geographic Diversification ◽  
Banking Deregulation ◽  
Exogenous Shocks ◽  
Interstate Banking ◽  
The Impact

Abstract Exploiting staggered interstate banking deregulation as exogenous shocks to bank geographic expansion, we examine the causal effect of geographic diversification on systemic risk. Using the gravity-deregulation approach, we find that bank geographic diversification leads to higher systemic risk measured by the change in conditional value at risk ($\Delta$CoVaR) and financial integration (Logistic($R^{2}))$. Furthermore, we document that geographic diversification affects systemic risk via its impact on asset similarity. The impact of geographic diversification on systemic risk is stronger in BHCs located in states comoving less with the U.S. aggregate economy.

scholarly journals International Real Estate Review

2010 ◽  
Vol 13 (3) ◽  
pp. 351-394
Author(s):  
Luci Ellis ◽  
Keyword(s):  
United States ◽  
Financial Markets ◽  
Housing Prices ◽  
The United States ◽  
Mortgage Lending ◽  
Housing Crisis ◽  
Regulatory Systems ◽  
The Us ◽  
Credit Losses ◽  
Institutional Drivers

The crisis enveloping global financial markets since August 2007 was triggered by actual and prospective credit losses on US mortgages. Was the United States just unlucky to have been the first to experience a housing crisis? Or was it inherently more susceptible to one? I examine the limited international evidence available, to ask how the boom- bust cycle in the US housing market differed from elsewhere and what the underlying institutional drivers of these differences were. Compared with other countries, the United States seems to have: built up a larger overhang of excess housing supply; experienced a greater easing in mortgage lending standards; and ended up with a household sector more vulnerable to falling housing prices. Some of these outcomes seem to have been driven by tax, legal and regulatory systems that encouraged households to increase their leverage and permitted lenders to enable that development. Given the institutional background, it may have been that the US housing boom was always more likely to end badly than the booms elsewhere.

Analysis of Interstate Banking Deregulation in The United States

Paradigm ◽  
1998 ◽  
Vol 1 (2) ◽  
pp. 1-9
Author(s):  
Dinesh K. Sharma ◽  
Julius A Alade ◽  
Hari P. Sharma
Keyword(s):  
United States ◽  
Banking Industry ◽  
The United States ◽  
Positive Development ◽  
Depository Institutions ◽  
Banking Deregulation ◽  
Interstate Banking ◽  
Strategic Role ◽  
Negative Impacts ◽  
The Many

The purpose of this paper is to look at the intense controversy over interstate banking by analyzing the concerns and aspirations of the many players involved. The paper presents the positive and negative impacts of interstate banking from a number of perspectives. Our findings show that as much as the advent of interstate banking might lead to considerable bank consolidation and reduction in the number of smaller, local depository institutions that occupy strategic role in providing commercial and industrial loans to small business, the overall benefit of the deregulation provides a positive development for the banking industry.

Deepening Integration

2017 ◽  
Author(s):  
Yilmaz Akyüz
Keyword(s):  
Emerging Economies ◽  
Financial Integration ◽  
Foreign Currency ◽  
Financial System ◽  
The United States ◽  
Bank Loans ◽  
Capital Inflows ◽  
Resident Participation ◽  
International Financial System ◽  
Private And Public

After recurrent crises with severe consequences in the 1990s and early 2000s EDEs have become even more closely integrated into what is now widely recognized as an inherently unstable international financial system. This chapter discusses the factors accelerating global financial integration of EDEs, including monetary policies in major advanced economies, notably the United States. It examines capital inflows and outflows, external balance sheets, the size and composition of gross external assets and liabilities, distinguishing between equity and debt, private and public sectors, local currency and foreign currency debt, bond issues and bank loans, and cross-border and local lending by international banks. It provides data and information on the currency composition of external debt, and non-resident participation in domestic financial markets of emerging economies. These are used to identify the changes in the depth and pattern of integration of emerging economies into the international financial system since the early 1990s.

Proprietary information and the cost of bank debt

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
HyunJun Na
Keyword(s):  
Least Square ◽  
Bank Loan ◽  
Content Type ◽  
Loan Contracts ◽  
Proprietary Information ◽  
Banking Deregulation ◽  
Interstate Banking ◽  
Innovative Firms ◽  
Bank Loan Contracts ◽  
The Impact

PurposeThis study explores how the firm’s proprietary information has an impact on the bank loan contracts. It explains the propensity of using the competitive bid option (CBO) in the syndicate loans to solicit the best bid for innovative firms and how it changes based on industry competition and the degree of innovations. This research also examines how the interstate banking deregulation (Interstate Banking and Branching Efficiency Act) in 1994 affected the private loan contracts for innovative borrowers.Design/methodology/approachThe study uses various econometric analyses. First, it uses the propensity score matching analysis to see the impact of patents on pricing terms. Second, it uses the two-stage least square (2SLS) analysis by implementing the litigation and non-NYSE variables. Finally, it studies the impact of the policy change of the Interstate Banking and Branching Efficiency Act of 1994 on the bank loan contracts.FindingsFirms with more proprietary information pays more annual facility fees but less other fees. The patents are the primary determinants of the usage of CBO in the syndicate loans to solicit the best bid. While innovative firms can have better contract conditions by the CBO, firms with more proprietary information will less likely to use the CBO option to minimize the leakage of private information and the severe monitoring from the banks. Finally, more proprietary information lowered the loan spread for firms dependent on the external capital after the interstate banking deregulation.Originality/valueThe findings of this research will help senior executives with responsibility for financing their innovative projects. In addition, these findings should prove helpful for the lawmakers to boost economies.

Has tourism driven house prices in Germany? Time-varying evidence since 1870

2021 ◽  
pp. 135481662110088
Author(s):  
Sefa Awaworyi Churchill ◽  
John Inekwe ◽  
Kris Ivanovski
Keyword(s):  
World War Ii ◽  
Historical Data ◽  
House Prices ◽  
Housing Prices ◽  
Time Varying ◽  
Data Set ◽  
Time Series Modelling ◽  
The Impact ◽  
Tourism Flows ◽  
Non Parametric

Using a historical data set and recent advances in non-parametric time series modelling, we investigate the nexus between tourism flows and house prices in Germany over nearly 150 years. We use time-varying non-parametric techniques given that historical data tend to exhibit abrupt changes and other forms of non-linearities. Our findings show evidence of a time-varying effect of tourism flows on house prices, although with mixed effects. The pre-World War II time-varying estimates of tourism show both positive and negative effects on house prices. While changes in tourism flows contribute to increasing housing prices over the post-1950 period, this is short-lived, and the effect declines until the mid-1990s. However, we find a positive and significant relationship after 2000, where the impact of tourism on house prices becomes more pronounced in recent years.

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