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An In-depth Look at Large and Complex Banks

May 29, 2014 Comments off

An In-depth Look at Large and Complex Banks
Source: Federal Reserve Bank of New York

The Federal Reserve Bank of New York today released a special Economic Policy Review series on large and complex banks. The 11 research papers that make up this series provide analysis in several key areas, including bank size, complexity and resolution. The papers, which are written by New York Fed economists, aim to further study and debate of these topics and to help inform policymakers.

Among the papers’ key findings:
Bank size has benefits and costs: the upside is the potential for economies of scale and lower operating costs; the downside is the “too-big-to-fail” problem and associated funding advantages and moral hazard.
Banks have become less bank-centric and more organizationally complex. Furthermore, the increase in bank complexity may be a natural response to an evolving intermediation technology.
Bail-in regimes, where the claims of creditors of the parent company are converted to equity in resolution, are an efficient and superior process for resolving the failure of a large financial firm. Requiring systemically important bank holding companies to issue “bail-inable” long-term debt that converts to equity in resolution would make large bank failures more orderly.

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New York Fed Report Shows Households Adding Debt

February 27, 2014 Comments off

New York Fed Report Shows Households Adding Debt
Source: Federal Reserve Bank of New York

In its latest Household Debt and Credit Report, the Federal Reserve Bank of New York announced that outstanding household debt increased $241 billion from the previous quarter, the largest quarter over quarter increase since the third quarter of 2007. The increase was led primarily by a 1.9 percent increase in mortgage debt ($152 billion). In Q4 2013 total household indebtedness increased to $11.52 trillion; 2.1 percent higher than the previous quarter.  Overall household debt remains 9.1 percent below the peak of $12.68 trillion in Q3 2008. The report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample drawn from anonymized Equifax credit data.

New York Fed Report Shows Households Adding Debt

February 19, 2014 Comments off

New York Fed Report Shows Households Adding Debt
Source: Federal Reserve Bank of New York

In its latest Household Debt and Credit Report, the Federal Reserve Bank of New York announced that outstanding household debt increased $241 billion from the previous quarter, the largest quarter over quarter increase since the third quarter of 2007. The increase was led primarily by a 1.9 percent increase in mortgage debt ($152 billion). In Q4 2013 total household indebtedness increased to $11.52 trillion; 2.1 percent higher than the previous quarter. Overall household debt remains 9.1 percent below the peak of $12.68 trillion in Q3 2008. The report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample drawn from anonymized Equifax credit data.

Are Recent College Graduates Finding Good Jobs?

January 21, 2014 Comments off

Are Recent College Graduates Finding Good Jobs? (PDF)
Source: Federal Reserve Bank of New York

According to numerous accounts, the Great Recession has left many recent college graduates struggling to find jobs that utilize their education. However, a look at the data on the employment outcomes for recent graduates over the past two decades suggests that such difficulties are not a new phenomenon: individuals just beginning their careers often need time to transition into the labor market. Still, the percentage who are unemployed or “underemployed”—working in a job that typically does not require a bachelor’s degree—has risen, particularly since the 2001 recession. Moreover, the quality of the jobs held by the underemployed has declined, with today’s recent graduates increasingly accepting low-wage jobs or working part-time.

Just Released: Are Recent College Graduates Finding Good Jobs?

June 28, 2013 Comments off

Just Released: Are Recent College Graduates Finding Good Jobs?
Source: Federal Reserve Bank of New York

Stories abound about recent college graduates who are struggling to find good jobs in today’s economy, especially with student debt levels rising so quickly. But just how bad are the job prospects for recent college graduates when one moves beyond anecdotes and looks at the data? How widespread is unemployment? And how common is it for college graduates to work in a job that doesn’t require a bachelor’s degree—that is, how widespread is underemployment? We examined these questions at today’s economic press briefing at the Federal Reserve Bank of New York.

In our presentation, we show that both unemployment and underemployment for young graduates are in fact higher now compared to, say, a decade ago. At the same time, however, we show that it is not unusual for newly minted college graduates to take some time to transition into the labor market and find jobs that utilize their education. In other words, young graduates typically have relatively high unemployment and underemployment rates as they start their careers, but those rates drop pretty rapidly by the time they hit their late twenties.

Perhaps not surprisingly, college major plays a key role in how well recent graduates have fared in the labor market. We show that there are large differences in unemployment rates, underemployment rates, and average wages across majors. In particular, we show that those with degrees in majors that provide technical training, such as “Engineering” and “Math & Computers,” or in those that are geared toward growing parts of the economy, such as “Education” and “Health,” have tended to do pretty well when compared to the rest of the pack. At the other end of the spectrum, those with a “Liberal Arts” or “Leisure & Hospitality” major tend to have lower wages, higher unemployment, and higher underemployment.

Regardless of major, though, we show that those with a college degree still tend to do better than those without. In fact, even recent college graduates who take a job that typically does not require a college degree tend to earn more than those with only an Associate’s degree or high school diploma—and this pattern is true for people with degrees in the lowest-paying majors. So, while times may have gotten tougher for recent college graduates since the Great Recession, obtaining a college degree still appears to provide significant economic benefits.

The Geography of Student Debt

May 21, 2013 Comments off

The Geography of Student Debt

Source: Federal Reserve Bank of New York

This morning, the New York Fed released its Quarterly Report on Household Debt and Credit for 2013 Q1. The report uses the FRBNY Consumer Credit Panel to show that outstanding household debt declined approximately $110 billion (about 1 percent) from the previous quarter. The drop was due in large part to a reduction in housing-related debt and credit card balances. Meanwhile, delinquency rates for each form of consumer debt declined, with the overall ninety-plus day delinquency rate dropping from 6.3 percent to 6.0 percent.

One of the unique aspects of the FRBNY Consumer Credit Panel, which is itself based on Equifax credit data, is the detail we obtain for each kind of household debt. This quarter, we have taken advantage of the geographic information available in the data set and are introducing a set of maps of our student loan data, which indicate regional variation in several dimensions of student debt. They depict:

  • Student loan borrowers as a share of the population. The population with active student loan debts, or “SL borrowers,” as a share of the population with a credit record varies substantially over space. For example, in Hawaii, less than 12 percent of people with a credit report have student debt, while in the District of Columbia over 25 percent do.
  • Student loan balances per SL borrower. Student indebtedness is significant for SL borrowers in virtually all states. Educational indebtedness per SL borrower ranges from a low of just under $21,000 in Wyoming to a high of over $28,000 in Maryland. Again, Washington, D.C., stands out: the average SL borrower there owes over $40,000. In general, we find SL-borrower debt levels are highest in California and along the Atlantic and Gulf coasts.
  • Percent of balance ninety-plus days delinquent. Delinquency rates show a distinct regional pattern, with states in the south and southwest having generally higher rates than those in the north. The lowest delinquency rate is South Dakota, at just over 6.5 percent, while the highest is in West Virginia, at nearly 18 percent.

Student loan indebtedness and delinquency continue to generate intense interest and we look forward to sharing data and perspectives that help define the scope of this important issue.

Young Student Loan Borrowers Retreat from Housing and Auto Markets

April 17, 2013 Comments off

Young Student Loan Borrowers Retreat from Housing and Auto Markets

Source: Federal Reserve Bank of New York

Student loans have soared in popularity over the past decade, with the aggregate student loan balance, as measured in the FRBNY Consumer Credit Panel, reaching $966 billion at the end of 2012. Student debt now exceeds aggregate auto loan, credit card, and home-equity debt balances—making student loans the second largest debt of U.S. households, following mortgages. Student loans provide critical access to schooling, given the challenge presented by increasing costs of higher education and rising returns to a degree. Nevertheless, some have questioned how taking on extensive debt early in life has affected young workers’ post-schooling economic activity.

To address this issue, we examine trends in homeownership, auto debt, and total borrowing at standard ages of entry into the housing and vehicle markets for U.S. workers.

As seen in the chart below, the share of twenty-five-year-olds with student debt has increased from just 25 percent in 2003 to 43 percent in 2012. Further, the average student loan balance among those twenty-five-year-olds with student debt grew by 91 percent over the period, from $10,649 in 2003 to $20,326 in 2012. Student loan delinquencies have also been growing…

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