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The Untold Story of Municipal Bond Defaults

August 17, 2012 Comments off

The Untold Story of Municipal Bond Defaults
Source: Federal Reserve Bank of New York

The $3.7 trillion U.S. municipal bond market is perhaps best known for its federal tax exemption on individuals and its low default rate relative to other fixed-income securities. These two features have resulted in household investors dominating the ranks of municipal bond holders. As shown below, individuals directly hold more than half, or $1.879 billion, of U.S. municipal debt; when $930 billion in mutual fund holdings is included, the household share rises to three-quarters. Although the low default history of municipal bonds has played a key role in luring investors to the market, frequently cited default rates published by the rating agencies do not tell the whole story about municipal bond defaults.

How Deeply Held Are Anti-American Attitudes among Pakistani Youth? Evidence Using Experimental Variation in Information

May 21, 2012 Comments off
Source:  Federal Reserve Bank of New York

This paper investigates how attitudes toward the United States are affected by the provision of information. We use an experimentally generated panel of attitudes, obtained by providing urban Pakistanis with fact-based statements describing the United States in either a positive or negative light. Anti-American sentiment is high and heterogenous in our sample at the baseline. We find that revised attitudes are, on average, significantly different from baseline attitudes, indicating that providing information had a meaningful effect on U.S. favorability. Observed revisions are a consequence of both the salience of already known information and information acquisition that leads to a convergence in attitudes across respondents with different priors. This analysis provides evidence that (i) public opinions are not purely a cultural phenomenon and are malleable, and (ii) the tendency of respondents to ignore information not aligned with their priors can be overcome. Our findings make the case for dissemination of accurate information about various aspects of the Pakistan-U.S. relationship in order to improve opinion toward the United States.

Full Paper (PDF)

Workforce Skills across the Urban-Rural Hierarchy

April 8, 2012 Comments off
Source:  Federal Reserve Bank of New York
This paper examines differences in the skill content of work throughout the United States, ranging from densely populated city centers to isolated and sparsely populated rural areas. To do so, we classify detailed geographic areas into categories along the entire urban-rural hierarchy. An occupation-based cluster analysis is then used to measure the types of skills available in the regional workforce, which allows for a broader measure of human capital than is captured by conventional measures. We fi nd that the occupation clusters most prevalent in urban areas—scientists, engineers, and executives—are characterized by high levels of social and resource-management skills, as well as the ability to generate ideas and solve complex problems. By contrast, the occupation clusters that are most prevalent in rural areas—machinists, makers, and laborers—are among the lowest in terms of required skills. These differences in the skill content of work shed light on the pattern of earnings observed across the urban-rural hierarchy.

Grading Student Loans

March 14, 2012 Comments off

Grading Student Loans
Source: Federal Reserve Bank of New York

Student loans support the education of millions of students nationwide, yet much is unknown about the student loan market. Relevant data are limited and, for the most part, anecdotal. Also, sources tend to focus on recent college graduates and do not reveal much information about the indebtedness of parents, graduate students, and those who drop out of school.

To inform the public and policymakers, we devote this post to some new findings obtained from the FRBNY Consumer Credit Panel, a unique and nationally representative data set sourced from Equifax credit reports. The FRBNY Consumer Credit Panel has made possible our Quarterly Report on Household Debt and Credit, first issued in the second quarter of 2010. We will examine the overall student loan debt market as of third-quarter 2011, giving particular attention to changes from the second to the third quarter and highlighting new findings by age group as well.

The outstanding student loan balance now stands at about $870 billion,1 surpassing the total credit card balance ($693 billion) and the total auto loan balance ($730 billion). With college enrollments increasing and the costs of attendance rising, this balance is expected to continue its upward trend. Further, unlike other types of household debt such as credit cards and auto loans, the student loan market is incredibly complex. Numerous players and institutions hold stakes at each level of the market, including federal and state governments, colleges and universities, financial institutions, students and their families, and numerous servicers and guarantee facilitators.

Do We Know What We Owe? A Comparison of Borrower- and Lender-Reported Consumer Debt

October 21, 2011 Comments off

Do We Know What We Owe? A Comparison of Borrower- and Lender-Reported Consumer Debt (PDF)
Source: Federal Reserve Bank of New York

Household surveys are the source of some of the most widely studied data on consumer balance sheets, with the Survey of Consumer Finances (SCF) generally cited as the leading source of wealth data for the United States. At the same time, recent research questions survey respondents’ propensity and ability to report debt characteristics accurately. We compare household debt as reported by borrowers to the SCF with household debt as reported by lenders to Equifax using the new FRBNY Consumer Credit Panel (CCP). Moments of the borrower and lender debt distributions are compared by year, age of household head, household size, and region of the country, in total and across five standard debt categories. The debt reports are strikingly similar, with one noteworthy exception: the aggregate credit card debt implied by SCF borrowers’ reports is less than 50 percent of the aggregate credit card debt implied by CCP lenders’ reports. Adjustments for sample representativeness and for small business and convenience uses of credit cards raise SCF credit card debt to somewhere between 52 and 66 percent of the CCP figure. Despite the credit card debt mismatch, bankruptcy history is reported comparably in the borrower and lender sources, indicating that not all stigmatized consumer behaviors are underreported.

New York Fed’s Quarterly Report on Household Debt and Credit Shows Continued Signs of Healing in Consumer Credit Markets

August 18, 2011 Comments off

New York Fed’s Quarterly Report on Household Debt and Credit Shows Continued Signs of Healing in Consumer Credit Markets
Source: Federal Reserve Bank of New York

The Federal Reserve Bank of New York today released its Household Debt and Credit Report for the second quarter of 2011. Consistent with last quarter’s findings, the report shows continued signs of healing in the consumer credit markets. The data show evidence of a modest increase in the willingness of consumers to borrow and banks to lend.

Among the results:

  • Balances on most loan types fell, but by very small amounts
  • Mortgage and home equity lines of credit both fell by $20 billion
  • Consumers’ non-real estate indebtedness fell by $10 billion (0.4 percent) and now stands at $2.28 trillion, 9.5 percent below its fourth quarter 2008 peak
  • Credit card limits increased for the second consecutive quarter—by $60 billion or about two percent
  • Account openings and closings continued their trends from the end of 2010
  • The number of open mortgage accounts held roughly steady again in the second quarter
  • Open credit card accounts jumped by 10 million, to 389 million
  • Credit inquiries within the last six months—an indicator of consumer demand for new credit—bounced back in the quarter after having fallen slightly in the first quarter
  • Delinquency rates and transitions continued their recent improvement
  • Both delinquent and seriously delinquent balances remain 15 percent below year-ago levels
  • New foreclosures fell again, bankruptcies rose as they tend to do in the second quarter
  • Both are well below their peak and year-ago levels. For example, new foreclosure notations were down 22.8 percent from the first quarter; new bankruptcies were down 23.8 percent from the second quarter of 2010
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