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Tag Archives: credit

How COVID-19 Affected First-Time Homebuyers

Donghoon Lee and Joseph Tracy Efforts in the spring of 2020 to contain the spread of COVID-19 resulted in a sharp contraction in U.S. economic growth and an unprecedented, rapid rise in unemployment. While the first wave of the pandemic slowed the spring housing market, home sales rebounded sharply over the rest of the year, with strong gains in house prices. Given the rising house prices and continuing high unemployment, concerns arose that COVID-19 may have negatively affected...

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Will Capital Flows through Global Banks Support Economic Recovery?

Claudia M. Buch, Matthieu Bussière, and Linda S. Goldberg While policymakers around the world have aggressively and swiftly reacted to the common negative economic shock from COVID-19, the timing and forms of policy responses in the economic recovery stage may be more geographically differentiated. The range in policy responses, along with variations in the financial health of banks, likely will affect the flow of international credit through global banks. In this post, we ask whether,...

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Mortgage Rates Decline and (Prime) Households Take Advantage

Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw Today, the New York Fed’s Center for Microeconomic Data reported that household debt balances increased by $206 billion in the fourth quarter of 2020, marking a $414 billion increase since the end of 2019. But the COVID pandemic and ensuing recession have marked an end to the dynamics in household borrowing that have characterized the expansion since the Great Recession, which included robust growth in...

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February Regional Business Surveys Find Widespread Supply Disruptions

Jason Bram and Richard Deitz Business activity increased in the region’s manufacturing sector in recent weeks but continued to decline in the region’s service sector, continuing a divergent trend seen over the past several months, according to the Federal Reserve Bank of New York’s February regional business surveys. Looking ahead, however, businesses expressed widespread optimism about the near-term outlook, with service firms increasingly confident that the business climate will...

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Up on Main Street

Donald P. Morgan and Steph Clampitt The Main Street Lending Program was the last of the facilities launched by the Fed and Treasury to support the flow of credit during the COVID-19 pandemic. The others primarily targeted Wall Street borrowers; Main Street was for smaller firms that rely more on banks for credit. It was a complicated program that worked by purchasing loans and sharing risk with lenders. Despite its delayed launch, Main Street purchased more debt than any other...

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How Does Zombie Credit Affect Inflation? Lessons from Europe

Viral V. Acharya, Matteo Crosignani, Tim Eisert, and Christian Eufinger Even after the unprecedented stimulus by central banks in Europe following the global financial crisis, Europe’s economic growth and inflation have remained depressed, consistently undershooting projections. In a striking resemblance to Japan’s “lost decades,” the European economy has been recently characterized by persistently low interest rates and the provision of cheap bank credit to impaired firms, or...

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The Costs of Corporate Debt Overhang Following the COVID-19 Outbreak

Kristian S. Blickle and João A. C. Santos Leading up to the COVID-19 outbreak, there were growing concerns about corporate sector indebtedness. High levels of borrowing may give rise to a “debt overhang” problem, particularly during downturns, whereby firms forego good investment opportunities because of an inability to raise additional funding. In this post, we show that firms with high levels of borrowing at the onset of the Great Recession underperformed in the following years,...

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Bank Capital, Loan Liquidity, and Credit Standards since the Global Financial Crisis

Sarah Ngo Hamerling, Donald P. Morgan, and John Sporn Did the 2007-09 financial crisis or the regulatory reforms that followed alter how banks change their underwriting standards over the course of the business cycle? We provide some simple, “narrative” evidence on that question by studying the reasons banks cite when they report a change in commercial credit standards in the Federal Reserve’s Senior Loan Officer Opinion Survey. We find that the economic outlook, risk...

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How Do Consumers Believe the Pandemic Will Affect the Economy and Their Households?

Olivier Armantier, Leo Goldman, Gizem Koşar, Jessica Lu, Rachel Pomerantz, and Wilbert van der Klaauw In this post we analyze consumer beliefs about the duration of the economic impact of the pandemic and present new evidence on their expected spending, income, debt delinquency, and employment outcomes, conditional on different scenarios for the future path of the pandemic. We find that between June and August respondents to the New York Fed Survey of Consumer Expectations (SCE)...

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Debt Relief and the CARES Act: Which Borrowers Face the Most Financial Strain?

Rajashri Chakrabarti, Andrew Haughwout, Donghoon Lee, William Nober, Joelle Scally, and Wilbert van der Klaauw In yesterday's post, we studied the expected debt relief from the CARES Act on mortgagors and student debt borrowers. We now turn our attention to the 63 percent of American borrowers who do not have a mortgage or student loan. These borrowers will not directly benefit from the loan forbearance provisions of the CARES Act, although they may be able to receive...

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