Person
James B. Thomson
Contributing Author
James B. Thomson is a contributing author and former employee of the Federal Reserve Bank of Cleveland.
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Working Papers
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Working Paper
Credit Market Information Feedback
09.16.2015 | WP 15-15We 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. -
Working Paper
Are Banks Forward-Looking in Their Loan Loss Provisioning? Evidence from the Senior Loan Officer Opinion Survey (SLOOS)
10.11.2014 | WP 13-13RThis 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. -
Working Paper
Are Banks Forward-Looking in Their Loan Loss Provisioning? Evidence from the Senior Loan Officer Opinion Survey (SLOOS)
09.11.2013 | WP 13-13This 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. -
Working Paper
Public Policy in Support of Small Business: The American Experience
08.02.2011 | WP 11-16Government interventions to alleviate credit constraints on small firms need to be designed to correct the specific market failure resulting in socially suboptimal credit flows. -
Working Paper
The Importance of Financial Market Development on the Relationship between Loan Guarantees for SMEs and Local Market Employment Rates
11.01.2010 | WP 10-20We empirically examine whether a major government intervention in the small-firm credit market yields significantly better results in markets that are less financially developed. -
Working Paper
Cleaning up the Refuse from a Financial Crisis: The Case for a Resolution Management Corporation
09.23.2010 | WP 10-15To 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. -
Working Paper
On Forecasting the Term Structure of Credit Spreads
04.01.2007 | WP 07-05Predictions 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. -
Working Paper
On Government Intervention in the Small-Firm Credit Market and Its Effect on Economic Performance
02.01.2007 | WP 07-02We 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. -
Working Paper
National Bank Notes and Silver Certificates
12.01.2006 | WP 06-22From 1883 to 1892, the circulation of national bank notes in the United States fell nearly 50 percent. -
Working Paper
Small Firm Credit Market Discrimination, SBA-Guaranteed Lending, and Local Market Economic Performance
11.01.2006 | WP 06-13We empirically test whether SBA-guaranteed lending has a greater impact on economic performance in markets with a high percentage of potential minority small businesses. -
Working Paper
Small-Firm Credit Markets, SBA-Guaranteed Lending, and Economic Performance in Low-Income Areas
01.01.2006 | WP 06-01SBA guaranteed-lending programs are one of many government-sponsored market interventions aimed at promoting small business. -
Working Paper
SBA-Loan Guarantees and Local Economic Growth
04.01.2005 | WP 05-03Increasingly policymakers are looking to the small business sector as a potential engine of economic growth. -
Working Paper
The Business Cycle and the Life Cycle
06.01.2004 | WP 04-04The 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. -
Working Paper
On SBA-Guaranteed Lending and Economic Growth
04.01.2004 | WP 04-03Increasingly, policymakers are looking to the small business sector as a potential engine of economic growth. -
Working Paper
On Credit Spread Slopes and Predicting Bank Risk
11.14.2003 | WP 03-14We examine whether credit-spread curves, engendered by a mandatory subordinated-debt requirement for banks, would help predict bank risk. -
Working Paper
Monitoring and Controlling Bank Risk: Does Risky Debt Serve Any Purpose?
05.01.2003 | WP 03-01We examine whether mandating banks to issue subordinated debt would serve to enhance market monitoring and control risk taking. -
Working Paper
Getting the Most Out of a Mandatory Subordinated Debt Requirement
11.01.2002 | WP 02-14Recent 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. -
Working Paper
PSAF, Economic Capital, and the New Basel Accord
08.01.2001 | WP 01-11The 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. -
Working Paper
Federal Home Loan Bank Lending to Community Banks. Are Targeted Subsidies Necessary?
08.01.2001 | WP 01-12The 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. -
Working Paper
Large Shareholders and Market Discipline in a Regulated Industry: A Clinical Study of Mellon Bank
02.01.1998 | WP 98-03The 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. -
Working Paper
Depositor Preference Legislation and Failed Banks' Resolution Costs
12.01.1997 | WP 97-15Included 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. -
Working Paper
The Changing Role of Banks and the Changing Value of Deposit Guarantees
01.02.1995 | WP 95-02This article develops a model for pricing deposit guarantees. -
Working Paper
Loan Sales: Pacific Rim Trade in Nontradable Assets
11.01.1994 | WP 94-14Foreign 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. -
Working Paper
Anticipating Bailouts: the Incentive-Conflict Model and the Collapse of the Ohio Deposit Guarantee Fund
06.01.1994 | WP 94-07An 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... -
Working Paper
Depositor Preference and the Cost of Capital for Insured Depository Institutions
03.01.1994 | WP 94-04Depositor-preference laws provide depositors with a claim on a failed depository institution’s assets that is senior to unsecured general creditor claims. -
Working Paper
Underlying Determinants of Closed-Bank Resolution Costs
03.01.1994 | WP 94-03This 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. -
Working Paper
Loan Sales, Implicit Contracts, and Bank Structure
10.01.1993 | WP 93-07We 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. -
Working Paper
Regulatory Taxes, Investment, and Financing Decisions for Insured Banks
05.01.1993 | WP 93-03This article develops a two-factor model of bank behavior under credit and interest rate risk. -
Working Paper
Capital Forbearance And Thrifts: An Ex Post Examination Of Regulatory Gambling
09.01.1992 | WP 92-09This 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. -
Working Paper
Troubled Savings and Loan Institutions: Voluntary Restructuring Under Insolvency
09.01.1991 | WP 91-12Regulatory agencies are unwilling or unable to close thrift institutions immediately upon insolvency. -
Working Paper
On Flexibility, Capital Structure, and Investment Decisions for the Insured Bank
07.01.1991 | WP 91-10Most models of deposit insurance assume that the volatility of a bank’s assets is exogenously provided. -
Working Paper
An Insider's View of the Political Economy of the Too-Big-to-Fail Doctrine
12.01.1990 | WP 90-17Understanding interbank exposure is the key to understanding the too big to fail doctrine. -
Working Paper
The Effect of Subordinated Debt and Surety Bonds on Banks' Cost of Capital and on the Value of Federal Deposit Insurance
10.01.1990 | WP 90-12This 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. -
Working Paper
Optimal Financial Structure and Bank Capital Requirements: An Empirical Investigation
07.01.1990 | WP 90-07This 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. -
Working Paper
An Analysis of Bank Failures: 1984 To 1989
12.01.1989 | WP 89-16This paper models the regulatory decision to close a bank as a call option. -
Working Paper
Using SMVAM as a Linear Approximation to a Nonlinear Function: A Note
08.01.1988 | WP 88-10A 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. -
Working Paper
Capital Requirements and Optimal Bank Portfolios: A Reexamination
08.01.1988 | WP 88-06An examination of the impact of increased capital requirements on bank portfolio behavior the impact of increased capital requirements on portfolio behavior is generally ambiguous. -
Working Paper
Deposit Insurance and the Cost of Capital
12.01.1987 | WP 87-14The impacts of deposit insurance and forbearance on the costs and value of uninsured deposits and equity capital are shown under three regimes. -
Working Paper
Errors in Recorded Security Prices and the Turn-of-the-Year Effect
12.01.1986 | WP 86-11A study that concludes recorded security price errors are potential sources of misspecification in joint tests of the capital asset pricing model and market efficiency. -
Working Paper
The Use of Market Information in Pricing Deposit Insurance
08.01.1986 | WP 86-09An argument that information about the value of the deposit-insurance guarantee is available from market-generated data.
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Financial Services Research Group Working Papers
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Financial Services Research Group Working Papers
Reliability Analysis of the Federal Reserve Automated Payments Systems
11.01.1997 | WP FSRG 03-97This paper proposes an analytic framework for the reliability assessment of the automated payments systems used by the Federal Reserve Banks.
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Economic Commentaries
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Economic Commentary
Capital Requirements for Financial Firms
11.01.2012 | EC 2012-18One of the reforms proposed for preventing financial crises is to require financial institutions to hold more capital. -
Economic Commentary
The History and Rationale for a Separate Bank Resolution Process
02.02.2012 | EC 2012-01Everyone recognizes the need to have a credible resolution regime in place for financial companies whose failure could harm the entire financial system. -
Economic Commentary
How Well Does Bankruptcy Work When Large Financial Firms Fail? Some Lessons from Lehman Brothers
10.26.2011 | EC 2011-23We 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. -
Economic Commentary
Resolving Large, Complex Financial Firms
08.31.2011 | EC 2011-16How 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. -
Economic Commentary
An End to Too Big to Let Fail? The Dodd–Frank Act’s Orderly Liquidation Authority
01.05.2011 | EC 2011-01One 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. -
Economic Commentary
Stripdowns and Bankruptcy Lessons from Agricultural Bankruptcy Reform
08.03.2010 | EC 2010-09One 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. -
Economic Commentary
Credit Spreads and Subordinated Debt
03.01.2007 | EC 3/1/2007Stock and bond prices contain allsorts of information about investors’beliefs and expectations. -
Economic Commentary
Industrial Loan Companies
08.01.2006 | EC 10/1/2006Once 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. -
Economic Commentary
The Role of Relationships in Small-Business Lending
10.15.2005 | EC 10/15/2005In the presence of imperfect information, both large and small banks try to find alternative ways to identify creditworthy borrowers. -
Economic Commentary
Umbrella Supervision
09.15.2005 | EC 9/15/2005Deregulation 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. -
Economic Commentary
Are SBA Loan Guarantees Desirable?
09.15.2004 | EC 9/15/2004Over 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. -
Economic Commentary
The Evolving Role of the Federal Home Loan Banks in Mortgage Markets
06.01.2003 | EC 6/1/2003The Federal Home Loan Banks are part of a system created by the federal government to promote home ownership. -
Economic Commentary
Commercial Banks' Borrowing from the Federal Home Loan Bank
07.01.2002 | EC 7/1/2002Since 1990, when commercial banks were first eligible to join the Federal Home Loan Bank System, they have become an important constituency of the FHLBs. -
Economic Commentary
Who Benefits from Increasing the Federal Deposit Insurance Limit?
09.15.2001 | EC 9/15/2001Who 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? -
Economic Commentary
Two Deposit Insurance Funds Are Not Necessarily Better than One
10.15.2000 | EC 10/15/2000Does the United States need to maintain two separate insurance funds for banks and thrifts? -
Economic Commentary
Raising the Deposit-Insurance Limit: A Bad Idea Whose Time Has Come?
04.15.2000 | EC 4/15/2000Federal deposit insurance protects the savings of small depositors, but it increases the likelihood that banks will take risks they otherwise would not have. -
Economic Commentary
The Exchange Stabilization Fund: How It Works
12.01.1999 | EC 12/1/1999The increased turmoil in international financial markets, starting with the Asian crises of 1997, has led to calls for financial assistance from the wealthier nations. -
Economic Commentary
Bank Notes and Stored-Value Cards: Stepping Lightly into the Past
09.01.1999 | EC 9/1/1998Stored-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. -
Economic Commentary
The Truth about Hedge Funds
05.01.1999 | EC 5/1/1999The 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. -
Economic Commentary
Network Externalities: The Catch-22 of Retail Payments Innovations
02.15.1998 | EC 2/15/1998For 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. -
Economic Commentary
The National Depositor Preference Law
02.15.1994 | EC 2/15/1994Last 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. -
Economic Commentary
Making the SAIF Safe for Taxpayers
11.01.1993 | EC 11/1/1993The 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. -
Economic Commentary
The Cost of Buying Time: Lessons from the Thrift Debacle
01.01.1993 | EC 1/1/1993The 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. -
Economic Commentary
FDICIA's Prompt Corrective Action Provisions
09.01.1992 | EC 9/1/1992Following 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. -
Economic Commentary
The RTC and the Escalating Costs of the Thrift Insurance Mess
05.15.1991 | EC 5/15/1991Almost daily, the news media report on the ever-growing cost of resolving the savings and loan (thrift) insurance crisis. -
Economic Commentary
Underlying Causes of Commercial Bank Failures in the 1980s
09.01.1990 | EC 9/15/1990Banks failed at record rates during the past decade, and no relief appears to be in sight. -
Economic Commentary
Economic Principles and Deposit-Insurance Reform
05.15.1989 | EC 5/15/1989The 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. -
Economic Commentary
Bank Lending to LBOs: Risks and Supervisory Response
02.15.1989 | EC 2/15/1989Leveraged buyouts (LBOs), a popular method of corporate restructuring in the past decade, have attracted significant attention among the news media, Congress, and bank regulators. -
Economic Commentary
FDIC Policies for Dealing with Failed and Troubled Institutions
10.01.1987 | EC 10/1/1987Bank failures reached a post- Depression high in 1986. -
Economic Commentary
Interbank Exposure in the Fourth Federal Reserve District
08.01.1987 | EC 8/1/1987Contagion risk in the banking system - the sensitivity of a bank to the failure of another bank - is a source of public policy concern. -
Economic Commentary
Alternative Methods for Assessing Risk-Based Deposit-Insurance Premiums
09.15.1986 | EC 9/15/1986One 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. -
Economic Commentary
Equity, Efficiency, and Mispriced Deposit Guarantees
07.15.1986 | EC 7/15/1986Federal deposit insurance is supposed to protect savers and to help stabilize our banking system.
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Policy Discussion Papers
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Policy Discussion Papers
Identifying and Resolving Financial Crises: A Conference Overview
08.01.2008 | No. 24Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. -
Policy Discussion Papers
Does Government Intervention in the Small-Firm Credit Market Help Economic Performance?
08.01.2007 | No. 22The guaranteed lending programs of the Small Business Administration (SBA) are large and growing rapidly. -
Policy Discussion Papers
Umbrella Supervision and the Role of the Central Bank
12.01.2005 | No. 11Deregulation and financial consolidation have led to the development of financial holding companies.
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