Liberty Street Economics
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October 18, 2017

What Explains Shareholder Payouts by Large Banks?



LSE_2017_What Explains Shareholder Payouts by Large Banks?

On June 28, the Federal Reserve released the latest results of the Comprehensive Capital Analysis and Review (CCAR), the supervisory program that assesses the capital adequacy and capital planning processes of large, complex banking companies. The Fed did not object to any of the banks’ capital plans, an outcome that was widely heralded as a signal that these banks would be able to increase payouts to their shareholders. And in fact, immediately following the release of the CCAR results, several large banks announced substantial increases in quarterly dividends and record-sized share repurchase programs. In this post, we put these announced increases into recent historical context, showing how banks’ payouts to shareholders have increased since the financial crisis and describing how CCAR has affected the composition of payouts between dividends and share repurchases.

October 16, 2017

Discretionary Services Spending Has Finally Made It Back (to 2007)



LSE_2017_Discretionary Services Spending Has Finally Made It Back (to 2007)

The current economic expansion is now the third-longest expansion in U.S. history (based on National Bureau of Economic Research [NBER] dating of U.S. business cycles). Even so, average growth in this expansion—a 2.1 percent annual rate—has been extraordinarily weak. In this post, I return to previous analysis on a specific portion of consumer spending—household discretionary services expenditures—that has displayed unusual weakness in the current expansion (see this post for the definition of discretionary versus nondiscretionary services expenditures, and these posts from 2012 and 2014 for previous updates). Even though these expenditures have picked up over the past couple of years, such that they have finally exceeded their previous peak, their recovery remains well behind that of other major categories of consumer spending. One explanation for the slow growth of spending on discretionary services is that households are concerned about their future income.

Posted by Blog Author at 7:00 AM in Great Recession , Macroecon | Permalink | Comments ( 2 )

October 13, 2017

Upstate New York’s Expansion Is Losing Steam



LSE_2017_Upstate New York’s Expansion Is Losing Steam

All in all, the upstate New York economy fared pretty well during the last business cycle. Job losses were less severe in upstate New York during the Great Recession than they were for the nation as a whole, which was quite unusual. And once the jobs recovery began in 2010, employment in upstate New York started to grow again, though at a pace well below the nation’s. The result of this slow but steady recovery was that by mid-2015, upstate New York had gained back all of the jobs that were lost during the Great Recession—a milestone the region had failed to reach at all during the prior few business cycles. Troublingly, though, job growth in the region stalled shortly after crossing this milestone. Indeed, only a handful of jobs have been added to the area’s total employment count since early 2016. In this blog post, we explore the nature and magnitude of this slowdown in upstate New York.

Posted by Blog Author at 7:00 AM in Regional Analysis | Permalink | Comments ( 0 )

October 12, 2017

Just Released: New York Fed Markets Data Dashboard



LSE_2017_http://libertystreeteconomics.newyorkfed.org/2017/10/just-released-new-york-fed-markets-data-dashboard.html

The Federal Reserve Bank of New York releases data on a number of market operations, reference rates, monetary policy expectations, and Federal Reserve securities portfolio holdings. These data are released at different times, for different types of securities or rates, and for different audiences. In an effort to bring this information together in a single, convenient location, the New York Fed developed the Markets Data Dashboard, which was launched today.

October 11, 2017

U.S. Monetary Policy as a Changing Driver of Global Liquidity



LSE_2017_U.S. Monetary Policy as a Changing Driver of Global Liquidity

International capital flows channel large volumes of funds across borders to both public and private sector borrowers. As they are critically important for economic growth and financial stability, understanding their main drivers is crucial for both policymakers and researchers. In this post, we explore the evolving impact of changes in U.S. monetary policy on global liquidity.

Posted by Blog Author at 7:00 AM in Liquidity , Monetary Policy | Permalink | Comments ( 2 )

October 05, 2017

How Is Online Shopping Affecting Retail Employment?



LSE_How Is Online Shopping Affecting Retail Employment?

It’s been said that if you want to know how the economy is doing, look at how many people are carrying shopping bags. That adage may not hold so well today. The rise of the internet and e-commerce over the past two decades has chipped away at the market share of “brick and mortar” retailers. But it’s only been in the past few years that this shift in market share has had a noteworthy effect on retail employment. In this post, we focus on national and local employment trends in two categories of retail—department stores and nonstore retailers—and try to assess how the surge in online shopping has affected local labor markets across the United States.

October 04, 2017

The Cost and Duration of Excess Funding Capacity in Tri-Party Repo



LSE_2017_The Cost and Duration of Excess Funding Capacity in Tri-Party Repo

In a previous post, we showed that dealers sometimes enter into tri-party repo contracts to acquire excess funding capacity, and that this strategy is most prevalent for the agency mortgage-backed securities (MBS) and equity asset classes. In this post, we examine the maturity of the repos used to pursue this strategy and estimate the associated costs. We find that repos that generate excess funding capacity for equities and corporate debt have longer maturities than the average repo involving either of these asset classes. Furthermore, the premiums dealers pay to maintain excess funding capacity can be substantial, particularly for equities.

October 02, 2017

Excess Funding Capacity in Tri-Party Repo



LSE_2017_Excess Funding Capacity in Tri-Party Repo

Security dealers sometimes enter into tri-party repo contracts to fund one class of securities with the expectation they will wind up settling the contract with higher quality securities. This strategy is costly to dealers because they could have borrowed funds at lower rates had they agreed to use the higher-quality securities at the outset. So why do dealers do this? Why obtain or arrange excess funding for the initial asset class? In this post, we discuss possible rationales for an excess funding strategy and measure the extent of excess funding capacity in the tri-party repo market. In a second post, we examine the maturities of repos used to generate excess funding capacity and estimate the costs of this strategy.

September 29, 2017

Hey, Economist! Tell Us about Your First Year as Research Director of the New York Fed



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A year has passed since Beverly Hirtle was named director of research for the Federal Reserve Bank of New York. Before assuming that position, Bev played many roles at the Bank over the last thirty years, including serving as the deputy chair of the Federal Reserve Model Oversight Group responsible for designing and implementing the Comprehensive Capital Analysis and Review and Dodd-Frank Act stress tests. But what was it like to become the head of the Research and Statistics Group and director of research? Hirtle offers some insight into her latest role.

Posted by Blog Author at 7:00 AM | Permalink | Comments ( 0 )

September 27, 2017

Why Pay Interest on Excess Reserve Balances?



LSE_2017_Why Pay Interest on Excess Reserve Balances?

In a previous post, we described some reasons why it is beneficial to pay interest on required reserve balances. Here we turn to arguments in favor of paying interest on excess reserve balances. Former Federal Reserve Chairman Ben Bernanke and former Vice Chairman Donald Kohn recently discussed many potential benefits of paying interest on excess reserve balances and some common misunderstandings, including that paying interest on reserves restricts bank lending and provides a subsidy to banks. In this post, we focus primarily on benefits related to the efficiency of the payment system and the reduction in the need for the provision of credit by the Fed when operating in a framework of abundant reserves.

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Liberty Street Economics features insight and analysis from economists working at the intersection of research and policy. The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Donald Morgan.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.


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