6,075 research outputs found
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Punishment or Forgiveness? Loan Modifications in Private Label Residential Mortgage Backed Securities from 2008-2014
I estimate the extent to which modifications of privately securitized mortgages increased or forgave debt during the Great Recession and aftermath, from 2008-2014. I find that loan modifications weakened household balance sheets by adding $20 billion to household debt, with the net amount of debt added per modification doubling from 2010-2014. I also find that the increase in debt is consistent with capitalization of fees, but not missed interest payments. Capitalization of fees is significant because it has been associated with a principal-agent problem between investors and mortgage servicers preventing efficient loss mitigation, as well as consumer financial protection abuses
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Liar’s Loans, Mortgage Fraud, and the Great Recession
Losses in the market for private label residential mortgage backed securities (RMBS) were at the epicenter of the financial crisis from 2007-2009. Existing research has shown that a substantial portion of the poor performance of the loans securitized in this market was caused by fraudulent origination practices, and that these practices were misrepresented to investors who purchased securities based on these loans. However, to date no paper has estimated the effects of mortgage fraud on losses from foreclosure in this market. This paper fills this gap by 1) Accounting for total losses from foreclosure due to no/low documentation loans which were known colloquially within the industry as Liar\u27s Loans, and 2) Estimating what portion of these losses can be considered excess from the perspective of the investor. Losses are considered excess in the sense that they were higher than the expected losses for investors, had the loan quality information disclosed to them been accurate, instead of fraudulent. I find that Liar\u27s Loans account for roughly 70% of total losses, and 36% of losses in Liar\u27s Loans can be considered excess. Projected to the level of the entire market, this implies that 500 billion in losses from foreclosure are accounted for by Liar\u27s Loans. Roughly $125 billion, or 25% of total market losses, can be considered excess losses caused by fraud in Liar\u27s Loans
Modern Monetary Theory: Merits, Critiques, and Contemporary Implications
The study of macroeconomics is a diverse field, with conflicting opinions and numerous camps of thought. The election of 2016 brought this to the public attention, as the appointment of Stephanie Kelton as Senator Bernie Sanders’s campaign economic advisor brought Dr. Kelton’s heterodox school of macroeconomic policy to the attention of mass media. In particular, Modern Monetary Theory became a public discussion, particularly in the wake of stimulus spending during the COVID-19 pandemic. Modern Monetary Theory (MMT), a heterodox macroeconomic theory most discussed in far-left and post-Keynesian academic circles, has faced backlash from a centrist mass media. I investigate the three main critiques of Modern Monetary Theory as an undergraduate in the field, and address these critiques from my learned perspective
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The Revenue Potential of a Financial Transaction Tax for U.S. Financial Markets
This paper estimates the revenue potential of a financial transaction tax (FTT) for U.S. financial markets. We focus on analyzing the revenue potential of the Inclusive Prosperity Act that was introduced in the U.S. House of Representatives in 2012 and the U.S. Senate in 2015. The tax rates stipulated in this Act include 0.5 percent (50 basis points) for all stock transactions; 0.1 percent (10 basis points) for all bond transactions; and 0.005 percent (0.5 basis points) on the notional value of all derivative trades. We examine three sets of evidence to generate potential revenue estimates: 1) the levels of transaction costs in U.S. financial markets over time and within the range of financial market segments; 2) the extent of trading elasticities under various trading conditions; and 3) the current level of trading activity in U.S. financial markets. Based on this evidence, we conclude that a US FTT operating at the tax rates stated above would generate about 220 billion per year, which equals approximately 1.2 percent of current U.S. GDP. This revenue estimate as a share of GDP is consistent with experiences in other countries that have operated with FTTs with similar tax rates and other design features. It is also consistent with other projections based on tax rates that are comparable to those we are examining. In addition, we examine the 18-fold increase, between the 1970s and the present, in the ratio of stock market trading relative to productive investment spending by U.S. nonfinancial corporations. This sharp rise in stock market trading as a share of productive investments has not been associated with any growth in productive investments themselves. Working from this evidence, we conclude that a U.S. FTT, which should bring a fall in stock market trading relative to productive investment spending, should not, on balance, produce significant negative effects on productive investments
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Three Essays on U.S. Household Debt and the Sources of Systemic Financial Fragility
This dissertation consists of three essays which analyze the role of household debt in the financial crisis of 2007-2009, and weak recovery that followed. In these essays, I pursue the following research topics: 1) Estimation of the effects of mortgage fraud on losses to foreclosure, 2) Estimation of whether loan modifications increased or decreased debt, and 3) Analyzing the historical evolution of housing finance regulation to advance a proposal for reform. While formally independent, these essays share a common theoretical perspective located at the intersection of financial macroeconomics and political economy. These essays analyze how conflicts of interest and inside information in the structure of private mortgage securitization generated perverse incentives that increased financial fragility. These problems caused large losses to foreclosure for borrowers, investors, and the communities in which the foreclosures were located in.
The first essay describes how mortgage fraud by the financial services industry concentrated risk and leverage on the borrowers least able to bear it. The industry then deceived investors who bought securities based on these mortgages about the level of risk they were taking on. This essay finds that excess losses to foreclosure borne by investors due to fraud were substantial, prolonged through time, and concentrated in economically fragile communities that did not recover from the financial crisis. The second essay discusses how a conflict of interest between loan servicers and investors impeded efficient debt restructuring in loan modifications. This essay finds that instead of mitigating losses for investors by forgiving debt, servicers increased borrowers’ debt by imposing punitive fees. However, while these fees were profitable for servicers, they resulted in larger eventual losses for investors due to redefaults. The final essay locates the failures identified by the first two essays within the larger historical evolution of housing financial regulation. This essay proposes the creation of a new public option for household finance which would provide regulatory tools to prevent consumer protection abuses
Brain dehydration and neurologic deterioration after rapid correction of hyponatremia
Brain dehydration and neurologic deterioration after rapid correction of hyponatremia. We made rats severely hyponatremia varying the rate of onset and duration of the disturbance, and then compared rapid correction to slow correction. An acute fall in the plasma Na to 106 mEq/liter within seven hours caused seizures and coma, but these findings resolved and survival was 100%after either rapid or slow correction. A more gradual fall in plasma Na to 95 mEq/liter in three days caused neither seizures nor coma. Measurements of brain water and electrolytes showed that adaptive losses of brain Na and K (maximally depleted within seven hours) and slower losses of non-electrolyte solutes progressively reduced brain edema. After three days of hyponatremia, rapid correction to 119 mEq/liter with 1m NaCl or to 129 mEq/liter by withdrawing DDAVP caused brain dehydration because lost brain K and non-electrolyte solutes were recovered slowly. This treatment was followed by a delayed onset of severe neurologic findings, demyelinating brain lesions and a mortality rate of over 40%. Slow correction (0.3 mEq/liter/hr) avoided these complications and permitted 100%survival. We conclude that the rat adapts quickly to hyponatremia and can survive with extremely low plasma sodium concentrations for prolonged periods. Although rapid correction is well tolerated when hyponatremia is of brief duration, it may cause brain damage in animals that have had time to more fully adapt to the disturbance
The Heritage Leadership Process: Exploring Meaning Making and Social Emotional Competencies in Heritage Interpretation and Education for Sustainability
This study explores qualities identified as being critical to leadership work in heritage fields as identified by established leaders in heritage work. It also establishes a foundational definition of the term heritage leadership. After reviewing existing data to identify significant questions related to heritage leadership, the research team interviewed leaders in HIn and Education for Sustainability with a specific focus on leadership, meaning making, and social emotional competencies as guiding constructs in heritage leadership. A proposed definition of the term heritage leadership resulted: Heritage leaders aspire to serve others and to create meaningful connections to shared natural and cultural heritage through contextual application of skills and competencies, thereby fostering understanding with the intent to preserve and protect heritage for future generations. This study further explored heritage leadership as a process that leaders follow stemming from personal aspirations and attributes and moving to the development of skill sets and mindsets in preparation for engagement in meaning making as a desired outcome of heritage leadership activities. The characteristics identified in this heritage leadership process guide recommendations for organizational focus on personal and professional development opportunities for staff and students in the related fields. Generation of meaningful, emotional connections to shared social, cultural, and natural heritage is seen by heritage leaders as critical to engaging citizenry in efforts to understand, preserve, and protect shared heritage. Heritage leaders believe that the forging of these connections is crucial to the future well-being of our communities and societies at larg
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