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Financial economics vol 93(2 292-324 49 the table is

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Unformatted text preview: Financial Economics , vol. 93(2), 292-324. 49 The table is from Richard K. Green and Susan M. Wachter, 2005, The American Mortgage in Historical and International Context, Journal of Economic Perspectives , 19(4), 93-114. 50 These states are Alaska, Arizona, California, Connecticut, Florida, Idaho, Minnesota, North Carolina, North Dakota, Texas, Utah, and Washington. In some states such as California, home equity lines of credit and home equity loans are recourse loans even though original home loans are no-recourse. 51 One of the important factors that explain why banking balance sheets in some countries became excessively leveraged was the ease with which commercial banks could set up off-balance sheet vehicles and exploit loopholes in Basel capital requirements to reduce their regulatory capital requirements. See Acharya, Viral V. and Philipp Schnabl, “Do Global Banks Spread Global Imbalances? Asset-Backed Commercial Paper in the Financial Crisis of 2007-09”, International Monetary Fund Economic Review, forthcoming 2010 . 52 Former Federal Reserve Governor Alan Greenspan attributes the liquidity of mortgage markets to securitization rather than the extent of GSE portfolio holdings of mortgages. In a speech to the Conference on Housing, Mortgage Finance, and the Macroeconomy, Federal Reserve Bank of Atlanta, Atlanta, Georgia, dedicated to the theme of Government-sponsored enterprises (http://www.federalreserve.gov/boarddocs/speeches/2005/20050519/), he noted: “[S]ince the development of the MBS market, the determinants of interest rates that finance home purchase have exhibited little, if any, response to the size of GSE portfolios.” 53 Edward S. Prescott, 2002. "Can risk-based deposit insurance premiums control moral hazard?" Economic Quarterly, Federal Reserve Bank of Richmond, Spring, pp. 87-100. 54 See Acharya, Viral V., Adler, Barry, Roubini, Nouriel and Matthew Richardson, “Resolution Authority”, Chapter 8 in Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, 148 edited by Viral V Acharya, Thomas Cooley, Matthew Richardson and Ingo Walter, eds., John Wiley & Sons, October 2010. 55 Note that this feature closely resembles that of covered bonds, which is one of the more popular mortgage finance instruments that are employed internationally, as is described in Chapter 7. 56 MBA Response to the Administration’s Questions on the Secondary Market and GSEs, June 17, 2010 57 Toni Dechario, Patricia Mosser, Joseph Tracy, James Vickery and Joshua Wright (2010) “ A Private Lender Cooperative Model for Residential Mortgage Finance,” Federal Reserve Bank of New York, Staff Report no. 466, August 2010. 58 Numbers based on First American Core logic’s report on the number of homeowners who are underwater on their mortgages, and Deutsche Bank’s Securitization Reports on distribution of home equity in housing market....
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Financial Economics vol 93(2 292-324 49 The table is from...

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