James B. Thomson |

Former Vice President and Financial Economist

James Thomson is a former vice president and financial economist in the Research Department of the Federal Reserve Bank of Cleveland. He retired in February 2013.

Prior to joining the Bank in 1986, Dr. Thomson worked as a financial economist at the U.S. General Accounting Office. He is currently a member of the American Finance Association as well as the Financial Management Association. He has published numerous papers on federal deposit insurance, bank structure, and bank capital regulation, including articles in the Journal of Finance, Journal of Money, Credit, and Banking, and Journal of Small Business Management.

Dr. Thomson received his PhD and MA in economics from the Ohio State University and his bachelor’s in economics from Georgia Institute of Technology. He is married and has three children.

Fed Publications
Other Publications
Work in Progress

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Date

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Capital Requirements for Financial Firms	2012-18	James B Thomson; Joseph G Haubrich;	Economic Commentary
	Abstract: One of the reforms proposed for preventing financial crises is to require financial institutions to hold more capital. There are a number of unresolved issues related to such a requirement, ranging from the costs of increased capital requirements to the best way to structure them. Some of this research was presented at a recent conference, and we discuss the major findings in this Commentary.
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The History and Rationale for a Separate Bank Resolution Process	2012-01	James B Thomson; Thomas J Fitzpatrick; Moira Kearney-Marks;	Economic Commentary
	Abstract: Everyone recognizes the need to have a credible resolution regime in place for financial companies whose failure could harm the entire financial system, but people disagree about which regime is best. The emergence of the parallel banking system has led policymakers to reconsider the dividing line between firms that should be resolved in bankruptcy and firms that should be subject to a special resolution regime. A look at the history of insolvency resolution in this country suggests that a blended approach is worth considering. Activities that have potential systemic impact might be best handled administratively, while all other claims could be dealt with under a court-supervised resolution.
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How Well Does Bankruptcy Work When Large Financial Firms Fail? Some Lessons from Lehman Brothers	2011-23	James B Thomson; Thomas J Fitzpatrick;	Economic Commentary
	Abstract: There is disagreement about whether large and complex financial institutions should be allowed to use U.S. bankruptcy law to reorganize when they get into financial difficulty. We look at the Lehman example for lessons about whether bankruptcy law might be a better alternative to bailouts or to resolution under the Dodd-Frank Act's orderly liquidation authority. We find that there is no clear evidence that bankruptcy law is insufficient to handle the resolution of large complex financial firms.
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Resolving Large, Complex Financial Firms	2011-16	James B Thomson; Thomas J Fitzpatrick; Mark B Greenlee;	Economic Commentary
	Abstract: How to best manage the failure of systemically important financial firms was the theme of a recent conference at which the latest research on the issue was presented. Here we summarize that research, the discussions that it sparked, and the areas where considerable work remains.
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Public Policy in Support of Small Business: The American Experience	August, 2011	Federal Reserve Bank of Cleveland, working paper no. 11-16	James B Thomson; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: Information problems in small enterprise credit markets can result in a market equilibrium characterized by credit rationing. These information problems are potentially more severe during sharp economic downturns such as the recent Great Recession. Government interventions to alleviate credit constraints on small firms need to be designed to correct the specific market failure resulting in socially suboptimal credit flows. We argue that Small Business Administration loan guarantees are a potentially appropriate intervention and provide a review of empirical research that supports our contention.
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Keeping Banks Strong	March, 2011	Vol. 2, No. 1	James B Thomson; Joseph G Haubrich;	Forefront
	Abstract: To measure a bank's strength, one could look at factors like profitability or stock price, but few gauges are as revealing as a bank's capital level.
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How to Build a Bad Bank--for the Greater Good	March, 2011	Vol. 2, No. 1	James B Thomson;	Forefront
	Abstract: Among the many unwanted things that taxpayers get socked with during a financial crisis is a portfolio of deeply distressed assets--loans gone sour, millions of them, many of them sliced and bundled into securities that nobody can sell because nobody wants to buy.
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An End to Too Big to Let Fail? The Dodd–Frank Act’s Orderly Liquidation Authority	2011-01	James B Thomson; Thomas J Fitzpatrick;	Economic Commentary
	Abstract: One of the changes introduced by the sweeping new financial market legislation of the Dodd–Frank Act is the provision of a formal process for liquidating large financial firms—something that would have been useful in 2008, when troubles at Lehman Brothers, AIG, and Merrill Lynch threatened to damage the entire U.S. financial system. While it may not be the end of the too-big-to-fail problem, the orderly liquidation authority is an important new tool in the regulatory toolkit. It will enable regulators to safely close and wind up the affairs of those distressed financial firms whose failure could destabilize the financial system.
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The Importance of Financial Market Development on the Relationship between Loan Guarantees for SMEs and Local Market Employment Rates	November, 2010	Federal Reserve Bank of Cleveland working paper, no. 10-20	James B Thomson; Craig E Armstrong; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: We empirically examine whether a major government intervention in the small-firm credit market yields significantly better results in markets that are less financially developed. The government intervention that we investigate is SBA-guaranteed lending. The literature on financing small and medium size enterprises (SMEs) suggests that small firms may be exposed to a particular type of market failure associated with credit rationing. And SMEs in markets that are less financially developed will likely face a greater degree of this market failure. To test our hypothesis, we use the level of bank deposits per capita as our relative measure of financial market development, and we use local market employment rates as our measure of economic performance. After controlling for the appropriate cross-sectional market characteristics, we find that SBA-guaranteed lending has a significantly more (less) positive impact on the average annual level of employment when the local market is relatively less (more) financially developed. This result has important implications for public policy directives concerning where SBA-guaranteed lending should be directed.
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Cleaning up the Refuse from a Financial Crisis: The Case for a Resolution Management Corporation	September, 2010	Federal Reserve Bank of Cleveland, Working Paper no. 1015	James B Thomson;	Working Papers
	Abstract: Systemic banking and financial crises invariably result in the transfer of a large volume of distressed financial assets into the hands of the government, which must later dispose of them. The fiscal and economic costs of the crisis and the speed of recovery depend on how effectively the government’s salvage operations can re-privatize these assets. To maximize the operations’ effectiveness, I propose that the government create a temporary resolution management corporation. Drawing on Kane’s (1990) asset-salvage principles, as well as the U.S. experience with special-purpose entities for managing and disposing of assets stripped from distressed financial firms’ balance sheets, I propose a design for such a corporation.
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Stripdowns and Bankruptcy: Lessons from Agricultural Bankruptcy Reform	2010-9	James B Thomson; Thomas J Fitzpatrick;	Economic Commentary
	Abstract: One type of financial reform being proposed to deal with the aftermath of the housing crisis is allowing bankruptcy judges the authority to modify residential mortgages in a way referred to as a stripdown. The reform is seen by some as a partial solution to the rise in foreclosures and as a Pandora’s box by others. But the debate is not new one. The 1980s farm foreclosure crisis sparked similar proposals and concerns. Congress decided to enact legislation that contained a stripdown provision, resulting in the creation of Chapter 12 in the bankruptcy code. The effects of Chapter 12 stripdown authority after its enactment shed light on the efficacy of allowing bankruptcy judges similar authority for housing loans.
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Spotting a Financial Crisis Before It Happens	May, 2010	Vol. 1, No. 2	James B Thomson; Stephen J Ong;	Forefront
	Abstract: What could we have done differently to spot—and then stop—the impending financial crisis of 2008?
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Workshop on Entrepreneurial Finance: A Summary	November, 2009	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 28	James B Thomson; Timothy Dunne; Scott Shane;	Policy Discussion Papers
	Abstract: This Policy Discussion Paper summarizes papers that were presented at the Workshop on Entrepreneurial Finance, which was held March 12–13, 2009, at the Federal Feserve Bank of Cleveland. Researchers presented new empirical research that exploits data sets on entrepreneurial activity that are based on broad and representative data samples. Papers in the workshop focused primarily on analyses of the sources and structure of start-up finance, including the importance of bank lending, venture capital, angel investors, and owner equity. [NOTE: This issue is available only on-line. It was not printed.]
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On Systemically Important Financial Institutions and Progressive Systemic Mitigation	August, 2009	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 27	James B Thomson;	Policy Discussion Papers
	Abstract: One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically important and to give them more time-consistent incentives. It defines criteria for classifying firms as systemically important: size (the classic doctrine of too big to let fail) and the four C’s of systemic importance (contagion, concentration, correlation, and conditions); it also discusses the concept of progressive systemic mitigation. [NOTE: This issue is available only on-line. It was not printed.]
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Identifying and Resolving Financial Crises: A Conference Overview	August 2008	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 24	James B Thomson; Joseph G Haubrich;	Policy Discussion Papers
	Abstract: Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. Crisis interventions are fraught with trade-offs: What are the costs of doing nothing? What is the probability that markets will seize up? Are there viable alternatives? Will the intervention make further crises more likely? The Federal Reserve Bank of Cleveland and the FDIC sponsored a conference in April 2008 to debate and exchange ideas on these issues. The following document summarizes and ties together the contributions presented.
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Does Government Intervention in the Small-Firm Credit Market Help Economic Performance?	August 2007	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 22	James B Thomson; Ben R Craig; William E Jackson III;	Policy Discussion Papers
	Abstract: The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly. The SBA's fiscal year 2008 performance budget calls for $25 billion in guaranteed loans for small businesses-a new record for the agency. Some critics of SBA programs suggest they do not help small businesses or overall economic performance. Other critics suggest that these programs unfairly benefit the financial institutions that participate in SBA's guaranteed lending programs. While very little serious empirical evidence exists on whether the net economic impact of the SBA's guaranteed lending programs is positive or negative, a few recent studies provide some insight into the question. In general, they suggest a small positive impact of the SBA's programs on economic performance. However, the results are very tentative and further research is needed to declare a more definitive position. We provide a general overview of the SBA's guaranteed lending programs and summarize the results of these studies.
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On Forecasting the Term Structure of Credit Spreads	April, 2007	Federal Reserve Bank of Cleveland, Working Paper no. 0705	James B Thomson; C.N.V. Krishnan; Peter Ritchken;	Working Papers
	Abstract: Predictions of firm-by-firm term structures of credit spreads based on current spot and forward values can be improved upon by exploiting information contained in the shape of the credit-spread curve. However, the current credit-spread curve is not a sufficient statistic for predicting future credit spreads; the explanatory power can be increased further by exploiting information contained in the shape of the riskless-yield curve. In the presence of credit-spread and riskless factors, other macroeconomic, marketwide, and firm-specific risk variables do not significantly improve predictions of credit spreads. Current credit-spread and riskless-yield curves impound essentially all marketwide and firm-specific information necessary for predicting future credit spreads.
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On Government Intervention in the Small-Firm Credit Market and Its Effect on Economic Performance	March, 2007	Federal Reserve Bank of Cleveland, Working Paper no. 0702	James B Thomson; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: In this paper we empirically test whether the Small Business Administration's main guaranteed lending program--the 7(a) program--has a greater impact on economic performance in low-income markets than in others. Using local labor market employment rates as our measure of economic performance, we find a quantitatively positive impact of SBA 7(a) guaranteed lending, which is significantly larger in low-income areas.
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Credit Spreads and Subordinated Debt	March 1, 2007	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Joseph G Haubrich;	Economic Commentary
	Abstract: 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.
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National Bank Notes and Silver Certificates	December, 2006	Federal Reserve Bank of Cleveland, Working Paper no. 0622	James B Thomson; Bruce A Champ;	Working Papers
	Abstract: From 1883 to 1892, the circulation of national bank notes in the United States fell nearly 50 percent. Previous studies have attributed this to supply-side factors that led to a decline in the profitability of note issue during this period. This paper provides an alternative explanation. The decline in note issue was, in large part, demand-driven. The presence of a competing currency with superior features caused the public to substitute away from national bank notes.
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Small Firm Credit Market Discrimination, SBA-Guaranteed Lending, and Local Market Economic Performance	November, 2006	Federal Reserve Bank of Cleveland, Working Paper no. 0613	James B Thomson; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: We empirically test whether SBA-guaranteed lending has a greater impact on economic performance in markets with a high percentage of potential minority small businesses. This hypothesis is predicated on priors related to three overlapping assumptions. These three assumptions are: (1) The classic type of credit rationing developed in the seminal paper by Stiglitz and Weiss (1981) is more likely to occur in markets with a higher per capita percentage of minority small businesses because such markets are more likely to have more severe information asymmetry problems, (2) SBA-guaranteed lending is likely to reduce these credit rationing problems-thus improving the level of development of the local financial market, and (3) increased local financial market development helps to lubricate the wheels of economic performance (Rajan and Zingales, 1998). Using local labor market employment rates as our measure of economic performance, we find evidence consistent with this proposition. In particular, we find a positive and significant impact on the average annual level of employment in a local market of SBA-guaranteed lending in that local market. This impact is 200 percent larger in markets with a high percentage of potential minority small businesses. This result has important implications for public policy in general and SBA-guaranteed lending in particular.
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Industrial Loan Companies	October 1, 2006	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Ozgur Emre Ergungor;	Economic Commentary
	Abstract: Once Wal-Mart announced its intention to acquire an industrial loan company, a public furor arose that has brought a lot of attention to a type of institution that has existed for quite some time, but was not widely recognized outside of banking circles. What are ILCs and why have they become so controversial lately?
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Small-Firm Credit Markets, SBA-Guaranteed Lending, and Economic Performance in Low-Income Areas	January, 2006	Federal Reserve Bank of Cleveland, Working Paper no. 0601	James B Thomson; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: SBA guaranteed-lending programs are one of many government-sponsored market interventions aimed at promoting small business. The rationale for providing SBA loan guarantees is often based on the argument that they reduce credit rationing in low-income markets for small business loans. In this paper we empirically test whether SBA-guaranteed lending has a greater impact on economic performance in low-income markets. Using local labor market employment rates as our measure of economic performance, we find evidence consistent with this proposition. In particular, we find a positive and significant correlation between the average annual level of employment in a local market and the level of SBA-guaranteed lending in that local market. And the intensity of this correlation is relatively larger in low-income markets. Indeed, one interpretation of our results is that this correlation is positive and significant only in low-income markets. This result has important implications for public policy in general and SBA-guaranteed lending in particular.
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Umbrella Supervision and the Role of the Central Bank	December 2005	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 11	James B Thomson; Joseph G Haubrich;	Policy Discussion Papers
	Abstract: 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.
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The Role of Relationships in Small-Business Lending	October 15, 2005	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Ben R Craig;	Economic Commentary
	Abstract: In the presence of imperfect information, both large and small banks try to find alternative ways to identify creditworthy borrowers. Lending relationships are one way to go about this. Relationships between banks and small businesses tend to be much closer than those between banks and large businesses. This Commentary explains why lending relationships are valuable to both small businesses and banks, how they reduce information-lending problems, and what other solutions exist to help in the reduction
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Umbrella Supervision	September 15, 2005	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Joseph G Haubrich;	Economic Commentary
	Abstract: 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.
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SBA-Loan Guarantees and Local Economic Growth	April, 2005	Federal Reserve Bank of Cleveland, Working Paper no. 0503	James B Thomson; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: Increasingly policymakers are looking to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration (SBA) loan-guarantee program. Using a panel data set of SBA-guaranteed loans we assess whether SBA-guaranteed lending has an observable impact on local and regional economic performance.
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Systemic Banking Crises	February 2005	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 9	James B Thomson; Ozgur Emre Ergungor;	Policy Discussion Papers
	Abstract: Systemic banking crises can have devastating effects on the economies of developing or industrialized countries. This Policy Discussion Paper reviews the factors that weaken banking systems and make them more susceptible to crises.
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Are SBA Loan Guarantees Desirable?	September 15, 2004	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Ben R Craig; William E Jackson III;	Economic Commentary
	Abstract: Over the last 10 years, the Small Business Administration has been responsible for well over $100 billion in small business credit extensions, more than any single private lender. This Commentary explores the motivations for such a large investment of taxpayer dollars.
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On SBA-Guaranteed Lending and Economic Growth	April, 2004	Federal Reserve Bank of Cleveland, Working Paper no. 0403	James B Thomson; Ben R Craig; William E Jackson III;	Working Papers
	Abstract: Increasingly, policymakers are looking to the small business sector as a potential engine of economic growth. Policies to promote small businesses include tax relief, direct subsidies, and indirect subsidies through government lending programs. Encouraging lending to small business is the primary policy objective of the Small Business Administration (SBA) loan-guarantee program. Using a panel data set of SBA-guaranteed loans we assess whether SBA-guaranteed lending has an observable impact on local and regional economic performance.
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On Credit Spread Slopes and Predicting Bank Risk	November, 2003	Federal Reserve Bank of Cleveland, Working Paper no. 0314	James B Thomson; CNV Krishnan; Peter Ritchken;	Working Papers
	Abstract: The authors examine whether credit-spread curves, engendered by a mandatory subordinated-debt requirement for banks, would help predict bank risk. They extract the credit-spread curves each quarter for each bank in our sample, and analyze the information content of credit-spread slopes. They find that credit-spread slopes are significant predictors of future credit spreads. However, credit-spread slopes do not provide significant additional information on future bank-risk variables, over and above other bank-specific and market-wide information.
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The Evolving Role of the Federal Home Loan Banks in Mortgage Markets	June 2003	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: The Federal Home Loan Banks are part of a system created by the federal government to promote home ownership. This Commentary looks at new initiatives undertaken by these government-sponsored enterprises to expand their role in financial markets-and the attendant implications for their balance sheets.
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Monitoring and Controlling Bank Risk: Does Risky Debt Serve Any Purpose?	January, 2003	Federal Reserve Bank of Cleveland, Working Paper no. 0301	James B Thomson; CNV Krishnan; Peter Ritchken;	Working Papers
	Abstract: To examine whether mandating banks to issue subordinated debt would enhance market monitoring and control risk-taking, the authors extract the credit-spread curve for each banking firm in their sample. After controlling for changes in market and liquidity variables, they find that changes in credit spreads do not reflect changes in bank risk variables. The result is robust to firm type, examination rating, size, leverage, and profitability, as well as to different model specifications. They also find that issuing subordinated debt does not alter banks' risk-taking behavior. They conclude that a mandatory subordinated debt requirement for banks is unlikely to provide the intended benefits of enhancing risk-monitoring or controlling risk-taking.
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Commercial Banks' Borrowing from the Federal Home Loan Banks	July 2002	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: Since 1990, when commercial banks were first eligible to join the Federal Home Loan Bank System, they have become an important constituency of the FHLBs. Currently, seven out of 10 banks are members, and nearly half of all banks have advances outstanding. Given the wide range of activities that commercial banks can engage in, this Commentary asks whether FHLB lending to them is consistent with their traditional housing finance mission, with the Gramm-Leach-Bliley extension of their mission to provide liquidity support to community banks, or with both.
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Getting the most out of a mandatory subordinated debt requirement	January, 2002	Federal Reserve Bank of Cleveland, Working Paper no. 0214	James B Thomson; Rong Fan; Joseph G Haubrich; Peter Ritchken;	Working Papers
	Abstract: Recent advances in asset pricing-the reduced-form approach to pricing risky debt and derivatives-are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. The authors find that credit spreads on both fixed- and floating-rate subordinated debt provide relatively clean signals of bank risk and are not unduly influenced by non-risk factors. Fixed-rate debt with a put is unacceptable, but making the putable debt floating resolves most problems. The authors' approach also helps to clarify several different notions of "bank risk."
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Who Benefits from Increasing the Federal Deposit Insurance Limit?	September 15, 2001	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: This Commentary seeks to shed light on the issue of deposit insurance coverage by examining who would benefit from increases in the insured-deposit limit.
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Unitary thrifts: a performance analysis	June 2001	Federal Reserve Bank of Cleveland, Economic Review, vol. 37, no. 2, pp. 2-14	James B Thomson;	Economic Review
	Abstract: Title IV of the Gramm-Leach-Bliley Act of 1999 closed the unitary thrift holding company loophole, which allowed a limited commingling of banking and commerce. This article examines whether eliminating this loophole was beneficial by empirically comparing the performance of thrifts in holding companies owned by nondepository institutions (UTHC thrifts) with other thrifts. Important differences between these two types of thrifts are found. UTHC thrifts tend to outperform the others during the period studied and appear to be less risky-possibly because UTHC thrifts seem to have more diversified revenue streams, loan and asset portfolios, and funding sources than do other thrifts. No evidence is found to suggest that limited commingling of banking and commerce, in the form of the UTHC loophole, poses undue risks to the federal financial safety net.
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Federal Home Loan Bank Lending to Community Banks. Are Targeted Subsidies Necessary?	January, 2001	Federal Reserve Bank of Cleveland, Working Paper no. 0112	James B Thomson; Ben R Craig;	Working Papers
	Abstract: The Gramm-Leach-Bliley Act of 1999 amended the lending authority of the Federal Home Loan Banks to include advances secured by small enterprise loans of community financial institutions. Three possible reasons for the extension of this selective credit subsidy to community banks and thrifts are examined, including the need to subsidize community depository institutions, stabilize the Federal Home Loan Banks, and address a market failure in rural markets for small enterprise loans. We empirically investigate whether funding constraints impact the small-business lending decision by rural community banks. Specifically, we estimate two empirical models of small-business lending by community banks. The data reject the hypothesis that access to increased funds will increase the amount of small-business loans made by community banks.
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PSAF, economic capital, and the new Basel Accord	January, 2001	Federal Reserve Bank of Cleveland, Working Paper no. 0111	James B Thomson;	Working Papers
	Abstract: The 1980 Monetary Control Act requires Reserve Banks to recover their costs of providing payments services over time, including a normal return on capital-that is, the same after-tax return on equity that a private firm would require. To date, this private-sector adjustment factor has been estimated and applied as a single hurdle rate for all Reserve Bank payments services. Capital budgeting theory suggests that firms should use a different hurdle rate for each distinct type of activity according to its risks. For Reserve Bank payments services, this might entail estimating separate private-sector adjustment factors for paper-based services and for electronic services. Alternatively, a single hurdle rate of capital could be used for all services if capital were allocated to each service according to its risk.
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Two Deposit Insurance Funds Are Not Necessarily Better than One	October 15, 2000	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: With the passage of the Financial Modernization Act in 1999, the FDIC began reforming our system of federal deposit guarantees. Among the possibilities it has recently raised is a merger of its Bank Insurance Fund with its Savings Association Insurance Fund. This Economic Commentary explores that option.
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Raising the Deposit-Insurance Limit: A Bad Idea Whose Time Has Come?	April 15, 2000	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: Federal deposit insurance protects the savings of small depositors, but it increases the likelihood that banks will take risks they otherwise would not have. Some bankers have suggested doubling the level of coverage to $200,000. While such an increase may put smaller banks on a par with larger ones, it exceeds the amount necessary to protect small savers and is unfair to taxpayers.
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The Exchange Stabilization Fund: How It Works	December 1999	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; William P Osterberg;	Economic Commentary
	Abstract: The increasingly controversial Exchange Stabilization Fund is used to influence the international value of the U.S. dollar and to provide aid to foreign countries. The debate surrounding the Fund will become more informed, the authors suggest, when observers understand how to calculate the total amount of resources available to the Fund. This Economic Commentary explains how the Fund’s balance sheet figures must be adjusted to produce an accurate account of those resources.
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Depositor-Preference Laws and the Cost of Debt Capital	July 1999	Federal Reserve Bank of Cleveland, Economic Review, vol. 35, no. 3	James B Thomson; William P Osterberg;	Economic Review
	Abstract: Under depositor-preference laws, depositors' claims on the assets of failed depository institutions are senior to unsecured general-creditor claims. As a result, depositor preference changes the capital structure of banks and thrifts, thereby affecting the cost of capital for depositories. Depositor preference has no impact on the total value of banks and thrifts, however, unless deposit insurance is mispriced.
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The Truth about Hedge Funds	May 1, 1999	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; William P Osterberg;	Economic Commentary
	Abstract: Do hedge funds help or hurt the financial markets in which they operate? The highly publicized troubles of Long Term Capital Management have once again focused the attention of policymakers and the press on the hedge fund industry and the cry for its regulation. This Economic Commentary refutes some of the commonly held myths about hedge funds and examines the rationale for regulating them.
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Banking Consolidation and Correspondent Banking	January 1999	Federal Reserve Bank of Cleveland, Economic Review, vol. 35, no.1	James B Thomson; William P Osterberg;	Economic Review
	Abstract: Banking consolidation, spurred on by interstate branching deregulation, is changing the competitive structure of banking markets. Policymakers and regulators have focused on the implications of the ongoing consolidation for customers of banks in retail and wholesale markets. Little attention, however, has been paid to the impact of interstate consolidation on correspondent banking markets-those markets where banks buy and sell inputs used to produce banking services. By studying the era of intrastate branching deregulation, the authors provide some insights on the implications of interstate branching for correspondent banking.
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Bank Notes and Stored-Value Cards: Stepping Lightly into the Past	September 1, 1998	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; William P Osterberg;	Economic Commentary
	Abstract: Like the bank notes that circulated in this country from 1863 to 1913, stored-value cards substitute the liabilities of private banks for government and central-bank liabilities. This shift may have important implications for the federal budget, the money supply, and monetary policy.
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Network externalities: the catch-22 of retail payments innovations	February 15, 1998	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; William P Osterberg;	Economic Commentary
	Abstract: An investigation of one of the reasons why electronic payments have not yet supplanted cash and checks in retail transactions: Consumers' willingness to use an innovation depends on the number of merchants who have already adopted it, and merchants' willingness to invest in the innovation depends on the number of consumers who are already using it.
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Large shareholders and market discipline in a regulated industry: a clinical study of Mellon Bank	January, 1998	Federal Reserve Bank of Cleveland, Working Paper no. 9803	James B Thomson; Joseph G Haubrich;	Working Papers
	Abstract: 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.
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Depositor Preference Legislation and Failed Banks' Resolution Costs	January, 1997	Federal Reserve Bank of Cleveland, Working Paper no. 9715	James B Thomson; William P Osterberg;	Working Papers
	Abstract: Included in the Omnibus Budget Reconciliation Act of 1993 was a provision that improved the priority of depositors and thus of the FDIC in the event of a depository institution's failure. While intended to reduce the FDIC's cost of resolving commercial bank failures, this provision might have induced general creditors to react so as to offset the intended benefit. Depositor preference legislation (DPL) might also have affected the FDIC's choice of resolution type. Here we examine the empirical impact of DPL on resolution type and on resolution costs for commercial banks. Given the short time period since the passage of national DPL in 1993, we focus on the impact of state DPL statutes, utilizing call-report data and FDIC data on resolution costs and resolution types for all operating FDIC-BIF insured commercial banks that were closed or required FDIC financial assistance from January 1986 through December 1992. We improve on previous studies by controlling for the endogeneity of book capital and by adjusting for the sample selection bias induced by regulatory closure rules. We find that DPL has 1) tended to increase, rather than reduce, FDIC resolution costs and 2) induced the FDIC to choose assisted mergers over liquidations. However, the source of the higher resolution costs is unclear and there is no evidence that general creditors reacted by increasing collateralization.
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Reliability analysis of the Federal Reserve automated payments systems	January, 1997	Financial Services Research Group Working Paper no. 0397	James B Thomson; Apostolos Burnetas; Gregory Reynolds;	Working Papers
	Abstract: A description of an analytic framework for the reliability assessment of the automated payments systems used by the Federal Reserve Banks. Alternative system configurations are also proposed and analyzed.
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SAIF policy options	June 1995	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; William P Osterberg;	Economic Commentary
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The changing role of banks and the changing value of deposit guarantees	January, 1995	Federal Reserve Bank of Cleveland, Working Paper no. 9502	James B Thomson; Ivilina Popova; Peter Ritchken;	Working Papers
	Abstract: This article develops a model for pricing deposit guarantees. The model treats the bank's investments as a portfolio of default-free bonds and risky loans. The risk of the loans is determined by individual firms' financing and investment decisions. Pushing back risk to the level of the borrowing firms allows us to link deposit guarantees to specific characteristics of these loans, such as their durations, and to correlations between business risk and interest rates. Since the nature of bank loans has been changing over time, our model should predict the accompanying change in value of the government guarantees.
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Federal Funds Futures as an Indicator of Future Monetary Policy: A Primer	January 1995	Federal Reserve Bank of Cleveland, Economic Review, vol. 31, no.1	James B Thomson; John B Carlson; Jean M McIntire;	Economic Review
	Abstract: Unlike most futures contracts, which are drawn on commodities or financial instruments whose price or yield is determined in competitive markets, the federal funds futures rate is essentially determined by a deliberative decision of the Federal Open Market Committee (FOMC). As such, the fed funds futures market is a place where one can place a bet as to what future monetary policy will be. The FOMC can thus assess in fairly precise terms what markets expect it to do. In this paper, the authors examine the predictive accuracy of the fed funds futures market and consider some policy implications. They find that accuracy clearly improves in the two-month period leading up to the contract's expiration and that the largest prediction errors occur around policy turning points.
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A Conference on Federal Credit Allocation	July 1994	Federal Reserve Bank of Cleveland, Economic Review, vol. 30, no. 3	James B Thomson; Joseph G Haubrich;	Economic Review
	Abstract: In October 1993, the Federal Reserve Bank of Cleveland and the Journal of Money, Credit, and Banking sponsored a conference that examined the costs, causes, and consequences of credit allocation by the federal government. The eight presenters looked at the broad rationale for government intervention in U.S. credit markets, analyzed some issues related to pensions and federal pension guarantees, and discussed a number of specific programs and regulations, including credit imperfections in housing markets, risk-based capital requirements for banks, and community reinvestment rules. This article is an overview of those proceedings.
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The national depositor preference law	February 15, 1994	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
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Loan sales: Pacific Rim trade in nontradable assets	January, 1994	Federal Reserve Bank of Cleveland, Working Paper no. 9414	James B Thomson; Joseph G Haubrich;	Working Papers
	Abstract: Foreign banks play a large role in the loan sales market. We examine this role using individual bank data on foreign-owned banks in the United States. We find that the motives for loan sales and purchases differ between U.S. and foreign-owned banks and between foreign banks of different regions. The evidence is consistent with foreign banks' using the market for diversification.
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Anticipating Bailouts: the Incentive-Conflict Model and the Collapse of the Ohio Deposit Guarantee Fund	January, 1994	Federal Reserve Bank of Cleveland, Working Paper no. 9407	James B Thomson; Ramon P DeGennaro;	Working Papers
	Abstract: An examination of the effect of the collapse of the Ohio Deposit Guarantee Fund on insured financial institutions in the context of the incentive-conflict model developed by Edward Kane, finding that differences in abnormal returns of FDIC and FSLIC firms tend to reaffirm that taxpayer-funded bailouts are a natural outgrowth of the moral-hazard problem that taxpayers face.
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Depositor Preference and the Cost of Capital for Insured Depository Institutions	January, 1994	Federal Reserve Bank of Cleveland, Working Paper no. 9404	James B Thomson; William P Osterberg;	Working Papers
	Abstract: Depositor-preference laws provide depositors with a claim on a failed depository institution's assets that is senior to unsecured general creditor claims. Therefore, depositor preference is correctly viewed as changing the capital structure of banks and thrifts and, consequently, these laws will affect the cost of capital for depositories. However, depositor preference will not have an impact on the total value of banks and thrifts unless deposit insurance is mispriced.
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Underlying determinants of closed-bank resolution costs	January, 1994	Federal Reserve Bank of Cleveland, Working Paper no. 9403	James B Thomson; William P Osterberg;	Working Papers
	Abstract: This paper looks at the underlying determinants of bank resolution costs. In the spirit of James (1991), resolution costs are modeled as functions of problem assets. However, we extend previous work by looking at more recent failures (from 1986 through 1992) and by extending our specification to include proxies for fraud, off-balance-sheet risk, brokered deposits, and both regional and size effects. Unlike James, we find no evidence that capital reflects net unbooked losses. On the other hand, we find roles for fraud, off-balance-sheet items, and both regional and size dummies. We also find evidence suggesting that regulators may have practiced forbearance.
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Making the SAIF safe for taxpayers	November 1, 1993	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
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The Evolving Loan Sales Market	July 15, 1993	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Joseph G Haubrich;	Economic Commentary
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Loan sales, implicit contracts, and bank structure	January, 1993	Federal Reserve Bank of Cleveland, Working Paper no. 9307	James B Thomson; Joseph G Haubrich;	Working Papers
	Abstract: We document some recent changes in the market for loan sales. We use a Tobit model to characterize the determinants of loan sales and purchases by banks, relating quantities bought and sold to bank size, capital, risk, and funding mode. The results, though not definitive, broadly confirm the Pennacchi model of sales. Other data cast doubt on the importance of mergers and acquisitions for this market and on the comparability of different data sources.
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Regulatory taxes, investment, and financing decisions for insured banks	January, 1993	Federal Reserve Bank of Cleveland, Working Paper no. 9303	James B Thomson; Anlong Li; Peter Ritchken; L Sankarasubramanian;	Working Papers
	Abstract: This article develops a two-factor model of bank behavior under credit and interest rate risk. In addition to flat-rate government deposit guarantees, we assume banks possess charter values that are lost if audits reveal that their tangible assets cannot cover their liabilities. Within this framework, we investigate the effects of interest rate and credit risk on optimal capital structure and investment decisions. We then show that with no uncertainty in interest rates, capital regulation will reduce the risk of the assets in the bank. However, with interest rate uncertainty, the impact of regulation may be detrimental and raise the risk of the deposits as well as the government subsidies to the shareholders of the bank.
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The cost of buying time: lessons from the thrift debacle	January 1, 1993	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
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FDICIA's Prompt Corrective Action Provisions	September 1, 1992	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Christopher J Pike;	Economic Commentary
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Forbearance, Subordinated Debt, and the Cost of Capital for Insured Depository Institutions	July 1992	Federal Reserve Bank of Cleveland, Economic Review, vol. 28, no. 3	James B Thomson; William P Osterberg;	Economic Review
	Abstract: Requiring banks to issue subordinated debt has been proposed as a way to reduce the deposit insurance subsidy and to increase market discipline. Using a modified cost of capital framework, this article develops an explicit pricing model for subordinated debt that considers the possibility of Federal Deposit Insurance Corporation forbearances. The results reveal that forbearance alters the required rate of return on subordinated debt while increasing its value to debt holders. Moreover, the authors show that a policy of forbearance weakens the effectiveness of such debt in reducing deposit insurance premiums and as a source of market discipline.
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Capital Forbearance And Thrifts: An Ex Post Examination Of Regulatory Gambling	January, 1992	Federal Reserve Bank of Cleveland, Working Paper no. 9209	James B Thomson; Ramon P DeGennaro;	Working Papers
	Abstract: This paper estimates the losses embedded in the capital positions of the 996 FSLIC-insured savings and loan institutions that did not meet capital standards at the end of the 1970s. We compare the estimated cost of resolving the insolvencies of these institutions at the end of the 1970s with the actual failure-resolution costs for those that were closed by July 3 1, 1992, and the projected resolution costs for the remaining thrifts that are likely to be closed. Our results show that even when one considers only the direct costs associated with delayed closure of economically failed thrifts, these costs significantly exceed reasonable estimates of the cost of prompt failure resolution.
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The RTC and the escalating costs of the thrift insurance mess	May 15, 1991	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Christopher J Pike;	Economic Commentary
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Predicting bank failures in the 1980s	March 15, 1991	Federal Reserve Bank of Cleveland, Economic Review, vol. 27, no. 1, pp. 9-20	James B Thomson;	Economic Review
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Troubled savings and loan institutions: voluntary restructuring under insolvency	January, 1991	Federal Reserve Bank of Cleveland, Working Paper no. 9112	James B Thomson; Ramon P DeGennaro; Larry H. P. Lang;	Working Papers
	Abstract: Regulatory agencies are unwilling or unable to close thrift institutions immediately upon insolvency. Instead, they have progressively reduced the thrift capital requirement, refrained from enforcing that requirement, and allowed thrifts to hold more nonmortgage loans in the hope that the industry would recover. According to this study, only 13 percent of the largest 300 firms eventually recovered between the end of 1979 and the end of 1989. When the thrift crisis surfaced in the early 1980s, the firms that ultimately recovered operated in a fashion similar to those that eventually failed. But in the mid-1980s, recovered thrifts pursued a risk-minimizing strategy, while nonrecovered thrifts pursued a risky, high-growth strategy. We find no evidence that managers of unsuccessful firms consumed more perquisites than their successful counterparts.
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On flexibility, capital structure, and investment decisions for the insured bank	January, 1991	Federal Reserve Bank of Cleveland, Working Paper no. 9110	James B Thomson; Ramon P DeGennaro; Anlong Li; Peter Ritchken;	Working Papers
	Abstract: Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders can respond to market events by adjusting previous investment and leverage decisions. This paper presents a dynamic model of a bank that allows for such behavior. The flexibility of being able to respond dynamically to market information has value to equity holders. The impact and value of this flexibility option are explored under a regime in which flat-rate deposit insurance is provided.
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Underlying causes of commercial bank failures in the 1980s	September 1, 1990	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Lynn Seballos;	Economic Commentary
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An Insider's View of the Political Economy of the Too-Big-to-Fail Doctrine	January, 1990	Federal Reserve Bank of Cleveland, Working Paper no. 9017	James B Thomson; Walker F Todd;	Working Papers
	Abstract: An explanation of the relationship between interbank exposure and the too big to fail doctrine, with an examination of the interbank exposure of U.S. banks between March 1984 and March 1990.
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The effect of subordinated debt and surety bonds on banks' cost of capital and on the value of federal deposit insurance	January, 1990	Federal Reserve Bank of Cleveland, Working Paper no. 9012	James B Thomson; William P Osterberg;	Working Papers
	Abstract: This paper examines two proposals to correct the risk-taking incentives embedded in the current deposit insurance system and to provide protection to the deposit insurance fund. the first would require banks to issue subordinated debt, and the second would require bank stockholders to post surety bonds. We use the cash-flow version of the Capital Asset Pricing Model to show how each proposal would affect the values and rates of return on uninsured deposits and equity. We then indicate the impact that each proposal would have on the values of the Federal Deposit insurance Corporation claim and on the bank, emphasizing the role of deposit insurance pricing.
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Optimal Financial Structure and Bank Capital Requirements: An Empirical Investigation	January, 1990	Federal Reserve Bank of Cleveland, Working Paper no. 9007	James B Thomson; William P Osterberg;	Working Papers
	Abstract: This paper presents an empirical analysis of the determinants of the leverage ratios (the book value of liabilities divided by the total of the book value of liabilities' and the market value of equity) for 232 bank holding companies for December 1986, June 1987, and December 1987. Many theoretical models of bank behavior assume that bank capital requirements will be binding, and empirical research has generally shown that almost all- banks will meet capital guidelines. However, if the optimal leverage ratios differ among banks, then banks' responses to changes in capital requirements or to changes in factors that influence their optimal leverage ratio may vary in a cross section. the theoretical framework is a variant of the one developed in Bradley, Jarrell , and Kim (1984) . the optimal' leverage ratio balances the tax advantage of debt with the costs of bankruptcy. in addition to considering nondebt tax shields and tax rates as determinants of the optimal ratio, we analyze the simultaneity between leverage and investment in municipal securities (munis). Previous research indicates that banks utilize munis to' minimize tax liabilities.
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Using Market Incentives to Reform Bank Regulation and Federal Deposit Insurance	January 1990	Federal Reserve Bank of Cleveland, Economic Review, vol. 26, no. 1	James B Thomson;	Economic Review
	Abstract: The current system of bank regulation and federal deposit insurance is not working and requires a massive overhaul. This paper looks at the issues involved in reforming the regulatory structure of the financial services industry, including the financial safety net. and presents the case for adopting market-oriemed reforms.
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Economic Principles and Deposit-Insurance Reform	May 15, 1989	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: A discussion of the fundamental economic principles to consider in evaluating proposals to reform the current system of federal deposit insurance.
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Bank Lending to LBO's: Risks and Supervisory Response	February 15, 1989	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: An examination of the risks associated with leveraged buyouts and a discussion of the current response of federal bank regulators to the increased participation of banks and bank holding companies in funding LBOs, stressing the need for appropriate internal controls.
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Bank lending to LBO's: Risks and Supervisory Response	February 15, 1989	Federal Reserve Bank of Cleveland, Economic Review	James B Thomson;	Economic Commentary
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An Analysis of Bank Failures: 1984 TO 1989	January, 1989	Federal Reserve Bank of Cleveland, Working Paper no. 8916	James B Thomson;	Working Papers
	Abstract: A study that models the regulatory decision to close a bank as a call option. A two-equation model of bank failure that treats closings as regulatorily timed events is compared with two single-equation models for accuracy.
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Bank Capital Requirements and the Riskiness of Banks: A Review	January 1989	Federal Reserve Bank of Cleveland, Economic Review, vol. 25, no. 1	James B Thomson; William P Osterberg;	Economic Review
	Abstract: A study of the impact of capital requirements on bank portfolio decisions, showing that the variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related deposit rates, and that the impact of increased capital requirements on portfolio behavior is generally ambiguous.
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Using Financial Data to Identify Changes in Bank Condition	April 1988	Federal Reserve Bank of Cleveland, Economic Review, vol. 24, no. 2	James B Thomson; Gary Whalen;	Economic Review
	Abstract: An empirical study using an early-warning bank failure prediction model and call-report data to predict deterioration in a bank's condition.
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Using SMVAM as a Linear Approximation to a Nonlinear Function: A Note	January, 1988	Federal Reserve Bank of Cleveland, Working Paper no. 8810	James B Thomson; Asli Demirguc-Kunt;	Working Papers
	Abstract: A study contending that the linear statistical market-value accounting model (SMVAM) is a reasonable approximation of the relationship between market and book equity for firms with positive balance sheets, but that the linear approximation is inadequate when the data sample includes firms whose balance sheets show a low or negative liquidation value.
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Capital Requirements and Optimal Bank Portfolios: a Reexamination	January, 1988	Federal Reserve Bank of Cleveland, Working Paper no. 8806	James B Thomson; William P Osterberg;	Working Papers
	Abstract: An examination of the impact of increased capital requirements on bank portfolio behavior, finding that although the variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related interest rates, the impact of increased capital requirements on portfolio behavior is generally ambiguous.
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FDIC Policies for Dealing with Failed and Troubled Institutions	October 1, 1987	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson; Daria B Caliguire;	Economic Commentary
	Abstract: A discussion of how the FDIC’s policies for handling bank failures can have unintended, and undesirable, effects on the banking system.
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Interbank Exposure in the Fourth Federal Reserve District	August 1, 1987	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: A discussion of the hypotheses that high levels of interbank exposure reduce the safety and soundness of the banking system and that interbank exposure affects the ability of the FDIC to use market discipline as a constraint on banks’ risk-taking, with comment on Fourth Federal Reserve District conditions.
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FSLIC Forbearances to Stockholders and the Value of Savings and Loan Shares	July 1987	Federal Reserve Bank of Cleveland, Economic Review, vol. 23, no. 3	James B Thomson;	Economic Review
	Abstract: An investigation of the value of FSLIC forbearances to the stockholders of insolvent stock-chartered thift institutions, concluding that these forbearances increase the stock-market value of thrift institutions
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Deposit Insurance and the Cost of Capital	January, 1987	Federal Reserve Bank of Cleveland, Working Paper no. 8714	James B Thomson; William P Osterberg;	Working Papers
	Abstract: The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes.
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Alternative Methods for Assessing Risk-Based Deposit Insurance Premiums	September 15, 1986	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: A discussion of various proposals to allow the Federal Deposit Insurance Corporation to vary the cost of deposit insurance on the basis of risk.
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Equity, Efficiency, and Mispriced Deposit Guarantees	July 15, 1986	Federal Reserve Bank of Cleveland, Economic Commentary	James B Thomson;	Economic Commentary
	Abstract: A discussion of federal deposit insurance, with the contention that it can be misused and can help destabilize the financial system by permitting insured institutions to take irresponsible risks.
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Errors in Recorded Security Prices and the Turn-of-the Year Effect	January, 1986	Federal Reserve Bank of Cleveland, Working Paper no. 8611	James B Thomson;	Working Papers
	Abstract: A study that concludes recorded security price errors are potential sources of misspecification in joint tests of the capital asset pricing model and market efficiency.
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The Use of Market Information in Pricing Deposit Insurance	January, 1986	Federal Reserve Bank of Cleveland, Working Paper no. 8609	James B Thomson;	Working Papers
	Abstract: An argument that information about the value of the deposit-insurance guarantee is available from market-generated data.
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Systemically Important Financial Institutions and Progressive Systemic Mitigation	September, 2010	DePaul Business and Commercial Law Journal, forthcoming	James B Thomson;	Journal Article
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Umbrella Supervision and the Role of the Central Bank	November 2008	Journal of Banking Regulation, vol. 10, no. 1, pp. 17-27	James B Thomson; Joseph G Haubrich;	Journal Article
	Abstract: 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 paper will suggest economies of scope between the Fed's inherent central banking responsibilities and those of an umbrella supervisor, and that these dual roles benefit both the Fed and functional regulators.
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Systemic Banking Crises Part I--Underlying Causes of Banking System Collapse	2006	Research in Finance, vol. 28	James B Thomson; Ozgur Emre Ergungor;	Journal Article
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Systemic Banking Crises II--Time-Consistent Crisis Resolution Policies	2006	Research in Finance, vol. 28	James B Thomson; Ozgur Emre Ergungor;	Journal Article
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Getting the Most Out of a Mandatory Subordinated Debt Requirement	Oct-Dec, 2004	Journal of Financial Services Research, vol. 24, no. 2/3, p 149.	James B Thomson; Rong Fan; Joseph G Haubrich; Peter Ritchken;	Journal Article
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Key Aspects for an Armenian Deposit Insurance System	June 2003	Rynok kapitala v Armenii (Capital Markets in Armenia), vol. 13, no. 14, pp. 52-57	James B Thomson; Artak Manukyan;	Journal Article
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Federal Home Loan Bank Lending To Community Banks: Are Targeted Subsidies Desirable?	2003	Journal of Financial Services Research, vol. 23, no. 1, pp. 5-28	James B Thomson; Ben R Craig;	Journal Article
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Depositor Preference Legislation and Failed Bank Resolution Costs	2003	Research in Finance, vol. 20, Elsevier Ltd., Amsterdam, pp. 33-59	James B Thomson; William P Osterberg;	Article in Book
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Large Shareholders and Market Discipline in a Regulated Industry: A Clinical Study of Mellon Bank	September 2003 (forthcoming)	Corporate Ownership and Control, vol. 1	James B Thomson; Joseph G Haubrich;	Journal Article
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Introduction to Conference Volume: Declining Treasury debt	August 1, 2002	Journal of Money, Credit, and Banking, August 2002, pp. 701-966	James B Thomson; Joseph G Haubrich;	Journal Article
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Reliability Analysis of the Federal Reserve Automated Payments Systems	May 2001	American Journal of Mathematical and Management Sciences	James B Thomson; Apostolos Burnetas; Gregory Reynolds;	Journal Article
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Thoughts on the Future of Payments and Central Banking: Panel Discussion at the Role of Central Banks in Money and Payments Systems	August 1, 1999	Journal of Money, Credit, and Banking, vol. 31, part 2, August 1999, pp. 677-681	James B Thomson;	Journal Article
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Introduction to Conference Volume: Comparative Financial Systems	August 1, 1998	Journal of Money, Credit, and Banking, vol. 30, no. 3, part 2, August 1998, pp. 421-425	James B Thomson; Joseph G Haubrich;	Journal Article
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Loan Sales: Pacific Rim Trade in Non-Tradeable Assets	1998	Advances In International Banking and Finance, vol. 3, 1998, pp.73-98.	James B Thomson; Joseph G Haubrich;	Journal Article
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Using Market Incentives to Reform Bank Regulation and Federal Deposit Insurance	1997	In: Reforming Money and Finance: Toward a New Monetary Regime, 1997, pp. 138-47 Second edition. Armonk, N.Y. and London: Sharpe	James B Thomson;	Article in Book
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Optimal Financial Structure and Bank Capital Requirements: An Empirical Investigation	December 1, 1996	Journal of Financial Services Research, vol. 10, no. 4, December 1996, pp. 315-32	James B Thomson;	Journal Article
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Loan Sales, Implicit Contracts, and Bank Structure	September 1, 1996	Review of Quantitative Finance and Accounting, vol. 7, no. 2, September 1996, pp. 137-62	James B Thomson; Joseph G Haubrich;	Journal Article
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Capital Forbearance and Thrifts: Examining the Costs of Regulatory Gambling	September 1, 1996	Journal of Financial Services Research, vol. 10, no. 3, September 1996, pp. 199-211	James B Thomson; Ramon P DeGennaro;	Journal Article
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Introduction to Conference Volume: Derivatives and Intermediation	August 1, 1996	Journal of Money, Credit, and Banking, vol. 28, August 1996, part 2, 421-425	James B Thomson; Joseph G Haubrich;	Journal Article
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Bank Capital Requirements and Optimal Capital Structure for Banks	1996	In: Research in finance. Volume 14, 1996, pp. 87-98 Greenwich, Conn. and London: JAI Press	James B Thomson; William P Osterberg;	Article in Book
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Regulatory Taxes, Investment and Financing Decisions for Insured Banks	1996	In: Advances In International Banking and Finance, vol. 2, 1996, Greenwich, CN: JAI Press Inc., 1-30	James B Thomson; Anlong Li; Peter Ritchken; L Sankarasubramanian;	Article in Book
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Anticipating Bailouts: The Incentive-Conflict Model and the Collapse of the Ohio Deposit Guarantee Fund	November 1, 1995	Journal of Banking and Finance, vol. 19, no. 8, November 1995, pp. 1401-18	James B Thomson; Ramon P DeGennaro;	Journal Article
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Underlying Determinants of Closed-Bank Resolution Costs	1995	In: The Causes and Costs of Depository Institution Failures, 1995, pp. 75-92, edited by, Allin F. Cottrell, Michael S. Lawlor, and John H. Wood.Innovations in Financial Markets and Institutions series. Boston; London and Dordrecht: Kluwer Academic	James B Thomson; William P Osterberg;	Article in Book
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Market Microstructure and Anomalies: Microstructure Issues in Global Diversification: Comments and Discussion	1995	In: Global Portfolio Diversification: Risk Management, Market Microstructure, and Implementation Issues, 1995, pp. 223-27 San Diego; London and Toronto: Harcourt Brace, Academic Press,	James B Thomson;	Article in Book
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Introduction to Conference Volume: Federal Credit Allocation: Theory, Evidence, and History	August 1, 1994	Journal of Money, Credit, and Banking, vol. 26, no. 3 part 2, August 1994, pp. 517-522	James B Thomson; Joseph G Haubrich;	Journal Article
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On Flexibility, Capital Structure and Investment Decisions for the Insured Bank	December 1, 1993	Journal of Banking and Finance, vol. 17, December 1993, 1133-1146	James B Thomson; Ramon P DeGennaro; Anlong Li; Peter Ritchken;	Journal Article
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Troubled Savings and Loan Institutions: Turnaround Strategies Under Insolvency	October 1, 1993	Financial Management, Autumn 1993, vol. 22, no. 3, pp. 163-75	James B Thomson; Ramon P DeGennaro; Larry H. P. Lang;	Journal Article
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Modeling the Bank Regulator's Closure Option: A Two-Step Logit Regression Approach	May 1, 1992	Journal of Financial Services Research, vol. 6, no. 1, May 1992, pp. 5-23	James B Thomson;	Journal Article
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On the Use of the Statistical Market-Value Accounting Model (SMVAM) in Thrifts	1992	In: Research in Finance, vol. 10 (1992), Greenwich, CN: JAI Press Inc., 239-246	James B Thomson; Asli Demirguc-Kunt;	Article in Book
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A Market-Based Approach to Reforming Bank Regulation and Federal Deposit Insurance	1992	In: Research in Financial Services: Private and Public Policy, 4, 1992, Greenwich, CN: JAI Press Inc., pp. 93-109	James B Thomson;	Article in Book
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The Effect of Subordinated Debt and Surety Bonds on the Cost of Capital for Banks and on the Value of Federal Deposit Insurance	September 1, 1991	Journal of Banking and Finance, vol. 15, no. 4-5, September 1991, pp. 939-53	James B Thomson; William P Osterberg;	Journal Article
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Bank Lending to LBOs: Risks and Supervisory Response	1991	In: Financial Institutions and Markets: A Reader, 1991, pp. 337-41 Miami: Kolb	James B Thomson;	Article in Book
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Using Market Incentives to Reform Bank Regulation and Federal Deposit Insurance	1991	In: Financial Institutions and Markets: A Reader, 1991, pp. 239-51 Miami: Kolb	James B Thomson;	Article in Book
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An Insider's View of the Political Economy of the Too Big to Let Fail Doctrine	1991	Public Budgeting and Financial Management: An International Journal, vol. 3, 1991, pp. 547-617	James B Thomson; Walker F Todd;	Journal Article
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Rethinking and Living with the Limits of Bank Regulation	December 1, 1990	The Cato Journal, vol. 9, no. 3, Winter 1990, pp. 579-600	James B Thomson; Walker F Todd;	Journal Article
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Deposit Insurance and the Cost of Capital	1990	In: Research in finance. Volume 8, 1990, pp. 255-70 A Research Annual Greenwich, Conn. and London: JAI Press	James B Thomson; William P Osterberg;	Article in Book
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Errors in Recorded Security Prices and the Turn-of-the-Year Effect	December 1, 1989	Journal of Financial and Quantitative Analysis, vol. 24, no. 4, December 1989, pp. 513-26	James B Thomson;	Journal Article
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The Use of Market Information in Pricing Deposit Insurance	November 1, 1987	Journal of Money, Credit, and Banking, vol. 19, no. 4, November 1987, pp. 528-37	James B Thomson;	Journal Article
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Alternative Methods for Assessing Risk-Based Deposit-Insurance Premiums	1987	In: Current Readings on Money, Banking, and Financial Markets, 1987, pp. 131-36, Frederic S. Mishkin, Consulting Editor Boston and Toronto: Little, Brown	James B Thomson;	Article in Book
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The Impact of Cramdowns on Mortgage Markets: Lessons from the Farm Credit Crisis	October, 2011		James B Thomson; Ben R Craig; Thomas J Fitzpatrick;	Unpublished manuscript
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