James B. Thomson

We examine how a combination of credit market and asset quality information can jointly be used in assessing bank franchise value. We find that expectations of future credit demand and future asset quality explain contemporaneous bank franchise value, indicative of the feedback in credit market information and its consequent impact on bank franchise value.

This paper makes a fundamental contribution by studying loan-loss provisioning over the credit cycle as three distinct phases. Looking at the three distinct phases of the financial crisis—the precrisis period, crisis period, and postcrisis period—is important as loan-loss provisioning is driven by different factors in each, in part due to extensive shifts in (or in the application of) regulatory rule. We show evidence of forward-looking loan-loss provisioning by utilizing Senior Loan Officer Opinion Surveys (SLOOS), which provide useful controls for credit cycle information. Though the SLOOS data set is a restricted sample and generalizability to a broader sample could potentially be a stretch, we control for credit cycle factors as part of an identification strategy to sort out changes in the credit market equilibrium. We contribute to the growing literature on forward-looking loan-loss provisioning and early-in-the-cycle loss recognition by incorporating a broader range of available credit information.

This paper makes a fundamental contribution by studying loan-loss provisioning over the credit cycle as three distinct phases. Looking at the three distinct phases of the financial crisis—the precrisis period, crisis period, and postcrisis period—is important as loan-loss provisioning is driven by different factors in each, in part due to extensive shifts in (or in the application of) regulatory rule. We show evidence of forward-looking loan-loss provisioning by utilizing Senior Loan Officer Opinion Surveys (SLOOS), which provide useful controls for credit cycle information. Though the SLOOS data set is a restricted sample and generalizability to a broader sample could potentially be a stretch, we control for credit cycle factors as part of an identification strategy to sort out changes in the credit market equilibrium. We contribute to the growing literature on forward-looking loan-loss provisioning and early-in-the-cycle loss recognition by incorporating a broader range of available credit information.

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 empirically examine whether a major government intervention in the small-firm credit market yields significantly better results in markets that are less financially developed.

To handle the large volume of distressed financial assets the government ends up with after systemic financial crises, I propose that the government create a temporary resolution management corporation.

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.

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.

From 1883 to 1892, the circulation of national bank notes in the United States fell nearly 50 percent.

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.

SBA guaranteed-lending programs are one of many government-sponsored market interventions aimed at promoting small business.

Increasingly policymakers are looking to the small business sector as a potential engine of economic growth.

The paper documents how cyclical fluctuations in market work vary over the life cycle and then assesses the predictions of a life-cycle version of the growth model for those observations.

Increasingly, policymakers are looking to the small business sector as a potential engine of economic growth.

We examine whether credit-spread curves, engendered by a mandatory subordinated-debt requirement for banks, would help predict bank risk.

We examine whether mandating banks to issue subordinated debt would serve to enhance market monitoring and control risk taking.

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 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.

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.

The change in control at Mellon Bank in 1987 sheds a unique light on several aspects of corporate control, because Mellon was one of only a few banks with a large shareholder.

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.

This article develops a model for pricing deposit guarantees.

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.

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...

Depositor-preference laws provide depositors with a claim on a failed depository institution’s assets that is senior to unsecured general creditor claims.

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.

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.

This article develops a two-factor model of bank behavior under credit and interest rate risk.

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.

Regulatory agencies are unwilling or unable to close thrift institutions immediately upon insolvency.

Most models of deposit insurance assume that the volatility of a bank’s assets is exogenously provided.

Understanding interbank exposure is the key to understanding the too big to fail doctrine.

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.

This paper presents an empirical analysis of the determinants of the leverage ratios for 232 bank holding companies for December 1986, June 1987, and December 1987.

This paper models the regulatory decision to close a bank as a call option.

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.

An examination of the impact of increased capital requirements on bank portfolio behavior the impact of increased capital requirements on portfolio behavior is generally ambiguous.

The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes.

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.

An argument that information about the value of the deposit-insurance guarantee is available from market-generated data.

This paper proposes an analytic framework for the reliability assessment of the automated payments systems used by the Federal Reserve Banks.

One of the reforms proposed for preventing financial crises is to require financial institutions to hold more capital.

Everyone recognizes the need to have a credible resolution regime in place for financial companies whose failure could harm the entire financial system.

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.

How to best manage the failure of systemically important financial firms was the theme of a conference at which the latest research on the issue was presented.

One of the changes introduced by the sweeping Dodd-Frank Act is the provision of a formal process for liquidating large financial firms-something that would have been useful in 2008.

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.

Stock and bond prices contain allsorts of information about investors’beliefs and expectations.

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.

In the presence of imperfect information, both large and small banks try to find alternative ways to identify creditworthy borrowers.

Deregulation and financial consolidationhave led to the development offinancial holding companies—allowingcommercial banking, insurance,investment banking, and other financialactivities to be conducted underthe same corporate umbrella.

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.

The Federal Home Loan Banks are part of a system created by the federal government to promote home ownership.

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.

Who might stand to benefit from doubling the insured-deposit limit to $200,000, and are such benefits consistent with the social objectives of federal deposit insurance?

Does the United States need to maintain two separate insurance funds for banks and thrifts?

Federal deposit insurance protects the savings of small depositors, but it increases the likelihood that banks will take risks they otherwise would not have.

The increased turmoil in international financial markets, starting with the Asian crises of 1997, has led to calls for financial assistance from the wealthier nations.

Stored-value cards are among the most interesting payments innovations of recent years. Balances on these cards can typically be transferred without involving a depository institution directly.

The highly publicized problems of Long Term Capital Management (LTCM) in 1998 have once again focused the attention of policymakers and the financial press on the hedge fund industry.

For more than two decades, economists and business journalists have heralded the coming of a paperless society in which electronic payments will quickly replace the use of cash and paper checks in retail transactions.

Last August 10, Congress passed the Omnibus Budget Reconciliation Act of 1993 (OBRA93). Contained in this legislation was a provision that dramatically revised the priority of claims on failed depository institutions.

The first concrete step toward resolving the decade-long thrift debacle was taken by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), which overhauled the federal savings and loan regulatory apparatus.

The collapse of the Federal Savings and Loan Insurance Corporation’s (FSLIC) deposit insurance fund, ranks as one of the greatest financial disasters of our time.

Following passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which addressed the insolvency of the Federal Savings and Loan Insurance Corporation’s deposit insurance fund.

Almost daily, the news media report on the ever-growing cost of resolving the savings and loan (thrift) insurance crisis.

Banks failed at record rates during the past decade, and no relief appears to be in sight.

The current system of federal deposit insurance subsidizes risk-taking by depository institutions, resulting in increased failure-resolution costs and decreased efficiency for the entire financial system.

Leveraged buyouts (LBOs), a popular method of corporate restructuring in the past decade, have attracted significant attention among the news media, Congress, and bank regulators.

Bank failures reached a post- Depression high in 1986.

Contagion risk in the banking system - the sensitivity of a bank to the failure of another bank - is a source of public policy concern.

One of the most widely debated topics in the political arena is the proposal to give the Federal Deposit Insurance Corporation (FDIC) the power to vary the cost of deposit-insurance on the basis of risk.

Federal deposit insurance is supposed to protect savers and to help stabilize our banking system.

Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades.

The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly.

Deregulation and financial consolidation have led to the development of financial holding companies.