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Foreign Nurse Importation to the United States and the Supply of Native Registered Nurses

November 19, 2014 Comments off

Foreign Nurse Importation to the United States and the Supply of Native Registered Nurses (PDF)
Source: Federal Reserve Bank of Boston

Importing foreign nurses has been used as a strategy to ease nursing shortages in the United States. The effectiveness of this policy critically depends on the long-run response of native-born nurses. We examine how the immigration of foreign-born registered nurses (RNs) affects the occupational choice and long-run employment decisions of native RNs. Using a variety of empirical strategies that exploit the geographical distribution of immigrant nurses across U.S. cities, we find evidence of large displacement effects—over a 10-year period, for every foreign nurse that migrates to a city, between one and two fewer native nurses are employed in that city. We find similar results at the state level using data on individuals taking the nursing board exam—an increase in the flow of foreign nurses significantly reduces the number of natives sitting for licensure exams in the states that are more dependent on foreign-born nurses compared to those states that are less dependent on foreign nurses. Using data on self-reported workplace satisfaction among a sample of California nurses, we find evidence suggesting that some of the displacement effects could be driven by a decline in the perceived quality of the workplace environment.

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Credit Risk in the Shared National Credit Portfolio is High; Leveraged Lending Remains a Concern

November 13, 2014 Comments off

Credit Risk in the Shared National Credit Portfolio is High; Leveraged Lending Remains a Concern
Source: Federal Reserve Board

The credit quality of large loan commitments owned by U.S. banking organizations, foreign banking organizations (FBOs), and nonbanks is generally unchanged in 2014 from the prior year, federal banking agencies said Friday. In a supplemental report, the agencies highlighted findings specific to leveraged lending, including serious deficiencies in underwriting standards and risk management of leveraged loans.

The annual Shared National Credits (SNC) review found that the volume of criticized assets remained elevated at $340.8 billion, or 10.1 percent of total commitments, which approximately is double pre-crisis levels. The stagnation in credit quality follows three consecutive years of improvements. A criticized asset is rated special mention, substandard, doubtful, or loss as defined by the agencies’ uniform loan classification standards. The SNC review was completed by the Federal Reserve Board, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency.

Leveraged loans as reported by agent banks totaled $767 billion, or 22.6 percent of the 2014 SNC portfolio and accounted for $254.7 billion, or 74.7 percent, of criticized SNC assets. Material weaknesses in the underwriting and risk management of leveraged loans were observed, and 33.2 percent of leveraged loans were criticized by the agencies.

The leveraged loan supplement also identifies several areas where institutions need to strengthen compliance with the March 2013 guidance, including provisions addressing borrower repayment capacity, leverage, underwriting, and enterprise valuation. In addition, examiners noted risk-management weaknesses at several institutions engaged in leveraged lending including lack of adequate support for enterprise valuations and reliance on dated valuations, weaknesses in credit analysis, and overreliance on sponsor’s projections.

Federal banking regulations require institutions to employ safe and sound practices when engaging in commercial lending activities, including leveraged lending. As a result of the SNC exam, the agencies will increase the frequency of leveraged lending reviews to ensure the level of risk is identified and managed.

Returning to the Nest: Debt and Parental Co-residence Among Young Adults

November 13, 2014 Comments off

Returning to the Nest: Debt and Parental Co-residence Among Young Adults (PDF)
Source: Federal Reserve Board

This paper examines the relationship between a young adults’ debt burden and the decision to co-reside with a parent. Using a quarterly panel of young adults’ credit histories, and controlling for age, county, and quarter fixed effects, and local demographic characteristics, unemployment rates, and house prices, we estimate the relationship between current period debt and subsequent decisions to co-reside with a parent. Our results indicate that indebtedness–as measured by average loan balances, declining credit scores and delinquency on accounts–increases flows into parental co-residence. Moreover, after moving in, delinquency and low credit scores increase time spent in co-residence. We find that the changing debt portfolios of young adults over this period–characterized by rising student loan debt and small declines in credit card, auto and mortgage debt–can predict 30 percent of the observed increase in flows into co-residence, and 26 percent of the observed increase in time spent in co-residence.

The Impact of Missed Payments and Foreclosures on Credit Scores

November 11, 2014 Comments off

The Impact of Missed Payments and Foreclosures on Credit Scores (PDF)
Source: Federal Reserve Bank of Cleveland

This paper debunks the common perception that “foreclosure will ruin your credit score.” Using individual-level data from a credit bureau matched with loan-level mortgage data, it is estimated that the very first missed mortgage payment leads to the biggest reduction in credit scores. The effects of subsequent loan impairments are increasingly muted. Post-delinquency foreclosures have only a minimal effect on credit scores. Moreover, credit scores improve substantially a year after borrowers experience 90-day delinquency or foreclosure. The data supports one possible explanation of this improvement: the absence of mortgage payments relaxes the borrowers’ budget constraint, allowing them to restore other forms of credit.

Does education loan debt influence household financial distress? An assessment using the 2007-09 SCF Panel

November 11, 2014 Comments off

Does education loan debt influence household financial distress? An assessment using the 2007-09 SCF Panel (PDF)
Source: Federal Reserve Board

This paper uses the recent 2007-09 SCF panel to examine the influence of student loans on financial distress. Families with student loans in 2007 have higher levels of financial distress than families without such loans, and these families were more susceptible to transitions to financial distress during the early stages of the Great Recession. This correlation persists once we control for a host of other demographic, work-status, and household balance sheet measures. Families with an average level of student loans were 3.1 percentage points more likely to be 60 days late paying bills and 3 percentage points more likely to be denied credit. During this same time period, families with other types of consumer debt were no more or less likely to be financially distressed.

Education loans enable students to go to college and improve their employment and earnings prospects. On average, families with education loans in the 2007-09 SCF saw higher income growth between surveys. Further, the value of completing a degree is evident in the data: families without a degree but with education debt drive much of the correlations between financial distress and education loans.

CRS — Federal Reserve: Oversight and Disclosure Issues (September 19, 2014)

October 28, 2014 Comments off

Federal Reserve: Oversight and Disclosure Issues (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Critics of the Federal Reserve (Fed) have long argued for more oversight, transparency, and disclosure. Criticism intensified following the extensive assistance to financial firms provided by the Fed during the financial crisis. In 2010, the identities of borrowers were publicly disclosed for the first time. Recently, critics have sought a Government Accountability Office (GAO) audit of the Fed.

Signaling Status: The Impact of Relative Income on Household Consumption and Financial Decisions

October 25, 2014 Comments off

Signaling Status: The Impact of Relative Income on Household Consumption and Financial Decisions (PDF)
Source: Federal Reserve Board

This paper investigates the importance of status in household consumption and financial decisions using household data from the Survey of Consumer Finances (SCF) linked to neighborhood data in the American Community Survey (ACS). We find evidence that a household’s income rank–its position in the income distribution relative to its close neighbors–is positively associated with its expenditures on high status cars, its level of indebtedness, as well as the riskiness of the household’s portfolio. More aggregate county-level evidence based on a dataset of every new car sold in each county in the United States since 2002 also suggests that the signaling motive might be important. These results indicate that greater income heterogeneity might have large consequences for household consumption and portfolio decisions.

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