Credit spreads and subordinated debt

Stock and bond prices contain all sorts of information about investors’ beliefs and expectations. For example, the interest rate on bank debt not insured by the FDIC has information about the health of the banks issuing the debt. Unfortunately, difficulties in extracting information from these subordinated debt prices reduces the information’ usefulness to regulators and policymakers.Deposit insurance ; Bank capital

A conference on federal credit allocation

An overview of an October 1993 conference that examined the costs, causes, and consequences of credit allocation by the federal government, covering both the broad rationale for government intervention in U.S. credit markets and a number of specific programs and regulations.Credit

Loan sales, implicit contracts, and bank structure

A documentation of some recent changes in the market for loan sales, using a tobit model to relate quantities of loans bought and sold to bank size, capital, risk, and funding mode.Bank loans

Umbrella supervision and the role of the central bank

Deregulation and financial consolidation have led to the development of financial holding companies—allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella—and the Federal Reserve has been named supervisor of the consolidated enterprise. This Policy Discussion Paper will show that there likely are economies of scope between the Fed’s inherent central-banking responsibilities and those of an umbrella supervisor and that these duel roles benefit both the Fed and functional regulators.Bank supervision ; Federal Reserve System

Large shareholders and market discipline in a regulated industry: a clinical study of Mellon Bank

An analysis of the 1987 change in control at Mellon, which was one of only a few banks with a large shareholder. It finds that the large shareholder did not monitor the firm extensively before it experienced performance difficulties, but was able to enforce a management change when problems arose without having to acquire a majority stake.Stockholders ; Mellon Bank

Loan sales: Pacific Rim trade in nontradable assets

An examination of the role of foreign banks in the loan sales market, finding that the motives for loan sales and purchases differ between U.S. and foreign-owned banks and between foreign banks of different regions, which is consistent with foreign banks' using the market for diversification.Loan sales ; Pacific Area ; International finance

Umbrella supervision

Deregulation and financial consolidation have led to the development of financial holding companies—allowing commercial banking, insurance, investment banking, and other financial activities to be conducted under the same corporate umbrella—and the Federal Reserve has been named supervisor of the consolidated enterprise. This Commentary explains the increasing importance of an umbrella supervisor amid the sea of regulatory agencies, and why the Fed may be the best natural choice, both practically and conceptually, to assume the role.Bank supervision ; Federal Reserve System

The evolving loan sales market

An examination of the continuing strength of the loan sales market, documenting its growth during the latter half of the 1980s, its subsequent downturn in the early 1990s, the effect of merger and acquisition activity, and the impact of the 1990-91 recession, plus a discussion of how these issues relate to the rationales for federal deposit insurance and bank regulation.Bank loans

Notes on the Basin of the River Rovuma, East Africa

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Baroclinic instability of time-dependent currents

Author Posting. © Cambridge University Press, 2003. This article is posted here by permission of Cambridge University Press for personal use, not for redistribution. The definitive version was published in Journal of Fluid Mechanics 490 (2003): 189-215, doi:10.1017/S0022112003005007.The baroclinic instability of a zonal current on the beta-plane is studied in the context of the two-layer model when the shear of the basic current is a periodic function of time. The basic shear is contained in a zonal channel and is independent of the meridional direction. The instability properties are studied in the neighbourhood of the classical steady-shear threshold for marginal stability. It is shown that the linear problem shares common features with the behaviour of the well-known Mathieu equation. That is, the oscillatory nature of the shear tends to stabilize an otherwise unstable current while, on the contrary, the oscillation is able to destabilize a current whose time-averaged shear is stable. Indeed, this parametric instability can destabilize a flow that at every instant possesses a shear that is subcritical with respect to the standard stability threshold. This is a new source of growing disturbances. The nonlinear problem is studied in the same near neighbourhood of the marginal curve. When the time-averaged flow is unstable, the presence of the oscillation in the shear produces both periodic finite-amplitude motions and aperiodic behaviour. Generally speaking, the aperiodic behaviour appears when the amplitude of the oscillating shear exceeds a critical value depending on frequency and dissipation. When the time-averaged flow is stable, i.e. subcritical, finite-amplitude aperiodic motion occurs when the amplitude of the oscillating part of the shear is large enough to lift the flow into the unstable domain for at least part of the cycle of oscillation. A particularly interesting phenomenon occurs when the time-averaged flow is stable and the oscillating part is too small to ever render the flow unstable according to the standard criteria. Nevertheless, in this regime parametric instability occurs for ranges of frequency that expand as the amplitude of the oscillating shear increases. The amplitude of the resulting unstable wave is a function of frequency and the magnitude of the oscillating shear. For some ranges of shear amplitude and oscillation frequency there exist multiple solutions. It is suggested that the nature of the response of the finite-amplitude behaviour of the baroclinic waves in the presence of the oscillating mean flow may be indicative of the role of seasonal variability in shaping eddy activity in both the atmosphere and the ocean.J.P.’s research is supported in part by a grant from NSF, OCE 9901654