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Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence From the Survey of Consumer Finances

July 15, 2015 Comments off

Small Businesses and Small Business Finance during the Financial Crisis and the Great Recession: New Evidence From the Survey of Consumer Finances (PDF)
Source: Federal Reserve Board

We use the Federal Reserve’s 2007, 2009 re-interview of 2007 respondents, and 2010 Surveys of Consumer Finances (SCFs) to examine the experiences of small businesses owned and actively managed by households during these turbulent years. This is the first paper to use these SCFs to study small businesses even though the surveys contain extensive data on a broad cross-section of firms and their owners. We find that the vast majority of small businesses were severely affected by the financial crisis and the Great Recession, including facing tight credit constraints. We document numerous and often complex interdependencies between the finances of small businesses and their owner-manager households, including a more complicated role of housing assets than has been reported previously. We find that workers who lost their job responded in part by starting their own small business, and that factors correlated with the survival of a small business differed greatly depending upon whether the firm was established or new. Our results strongly reinforce the importance of relationship finance to small businesses, and the primary role of commercial banks in such relationships. We find that both cross-section and panel data are needed to understand the complex issues associated with the creation, survival and failure of small businesses.

Agencies Issue Final Standards for Assessing Diversity Policies and Practices of Regulated Entities

June 10, 2015 Comments off

Agencies Issue Final Standards for Assessing Diversity Policies and Practices of Regulated Entities
Source: Board of Governors of the Federal Reserve System, Consumer Financial Protection Bureau, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, Securities and Exchange Commission

Federal agencies today issued a final interagency policy statement establishing joint standards for assessing the diversity policies and practices of the entities they regulate.

Section 342 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 required the Federal Reserve Board, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission to establish an Office of Minority and Women Inclusion (OMWI) at each agency to be responsible for all matters relating to diversity in management, employment, and business activities. The Dodd-Frank Act also instructed each OMWI director to develop standards for assessing the diversity policies and practices of the agencies’ regulated entities.

The final standards, which are generally similar to the proposed standards, provide a framework for regulated entities to create and strengthen their diversity policies and practices—including their organizational commitment to diversity, workforce and employment practices, procurement and business practices, and practices to promote transparency of organizational diversity and inclusion within the entities’ U.S. operations.

CRS — Export-Import Bank: Overview and Reauthorization Issues (March 25, 2015)

June 1, 2015 Comments off

Export-Import Bank: Overview and Reauthorization Issues (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The Export-Import Bank of the United States (Ex-Im Bank or the Bank), a wholly owned U.S. government corporation, is the official export credit agency (ECA) of the United States. Its mission is to assist in the financing of U.S. exports of goods and services to support U.S. employment. The FY2015 continuing resolution (Sec. 147 of P.L. 113-164) extends its general statutory charter (Export-Import Bank Act of 1945, as amended, 12 U.S.C. §635 et seq.) through June 30, 2015. The 114th Congress may debate whether to renew Ex-Im Bank’s authority; if so, for how long and under what terms; and if not, other policy alternatives.

Designating Systemically Important Financial Institutions (SIFIs), CRS Insights (March 20, 2015)

May 29, 2015 Comments off

Designating Systemically Important Financial Institutions (SIFIs), CRS Insights (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

The 2008 financial crisis resulted in government assistance to rescue several financial firms that were considered “too big to fail” (TBTF) because their failure would cause unacceptable disruptions to the overall financial system. Some of these were non-bank financial firms, including Bear Stearns, Fannie Mae, Freddie Mac, and AIG. A number of approaches (detailed in this CRS report) have been suggested to solve the “too big to fail” problem, some of which were enacted in the Dodd-Frank Act (P.L. 111- 203).

Overdraft U: Student Bank Accounts Often Loaded With High Overdraft Fees

May 22, 2015 Comments off

Overdraft U: Student Bank Accounts Often Loaded With High Overdraft Fees
Source: Center for Responsible Lending

Some colleges and banks enter into exclusive agreements to offer students checking accounts – usually these accounts come furnished with a debit card that prominently displays the school logo and can sometimes be used as student ID.

For banks, these exclusive agreements mean a captive audience for their bank products (checking accounts, credit card accounts) and usually a customer for life. Studies suggest that banks are a “sticky” product – once a consumer chooses one, they’re unlikely to change.

For colleges, these exclusive agreements mean increased revenue. These partnerships may include revenue sharing (based on the number of accounts opened by their students) and/or in-kind benefits (like the bank offering to manage the school’s financial aid disbursement).

The benefits to students are unclear at best. Some schools negotiate for some reductions in up-front costs (like waiving monthly maintenance fees), but – as this report shows – many of these accounts do not have better terms than what a student could find on their own.

Roundup of Recent CRS Reports About Business, Economics and Trade

May 18, 2015 Comments off

2014 Fair Lending Report

May 6, 2015 Comments off

2014 Fair Lending Report
Source: Consumer Financial Protection Bureau

We’ve taken important strides over the last year in our efforts to protect consumers from credit discrimination and broaden access to credit, as we identify new fair lending risks and monitor institutions for compliance. This report describes our fair lending activities in supervision, enforcement, rulemaking, interagency coordination, outreach, and interagency reporting.

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