James R. Barth is the Lowder Eminent Scholar in Finance at Auburn University, a Senior Fellow at the Milken Institute, and a Fellow at the Wharton Financial Institutions Center. Barth was an appointee of Presidents Ronald Reagan and George H.W. Bush as chief economist of the Office of Thrift Supervision and previously the Federal Home Loan Bank Board. He has also held the positions of professor of economics at George Washington University, associate director of the economics program at the National Science Foundation, and Shaw Foundation Professor of Banking and Finance at Nanyang Technological University. He has been a visiting scholar at the U.S. Congressional Budget Office, Federal Reserve Bank of Atlanta, Office of the Comptroller of the Currency, and the World Bank. Barth has testified before several U.S. Congressional Committees. He has authored articles in professional journals and has co-authored and co-edited several books, including Rethinking Bank Regulation: Till Angels Govern (Cambridge University Press), The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Meltdown (John Wiley
Natural disasters are negative shocks that can severely disrupt the communities in which they occ... more Natural disasters are negative shocks that can severely disrupt the communities in which they occur. Disasters like hurricanes, tornados, floods, wildfires, and earthquakes, moreover, can cause severe property damage, including damages to homes, businesses, and automobiles. An important issue that arises is whether branches of banks in communities affected by natural disasters raise deposit rates to attract additional deposits in response to any deposit withdrawals and to meet any increase in loan demand for the rebuilding that takes place. Studies of the responses of banks to natural disasters increasingly find it useful to rely on a difference-in-differences (DID) identification strategy. The contribution of our paper is to examine how different choices that can be made affect the empirical results. Importantly, as our empirical results indicate, the discretion that a researcher uses in terms of the choices made at different stages do indeed produce different conclusions about the impact of natural disasters on bank deposit rates. If we do not match branches affected by natural disasters with those in adjacent communities not affected the results indicate that natural disasters have a statistically negative effect on deposit rates without matching and with a low degree of matching. However, when we use a medium or a high degree of matching there is no statistically significant effect. Moreover, when we use two different matching methods, the results differ. In the case of PSM, we find a statistically significant effect, but no effect in the case of CEM.
The recent crisis has underlined the importance of the interaction of financial innovations and t... more The recent crisis has underlined the importance of the interaction of financial innovations and the housing market. We consider five major innovations relevant to housing finance. These are (i) mortgages; (ii) specialised housing finance institutions; (iii) government interventions in housing finance in the US during the Great Depression; (iv) covered bonds; and (v) securitised mortgages. The history of these innovations and their positive and negative aspects are discussed. Future innovations to help the stability of the housing market are also suggested.
Handbook of Safeguarding Global Financial Stability, 2013
For several decades prior to the financial crisis of 2007-08, the financial stability function of... more For several decades prior to the financial crisis of 2007-08, the financial stability function of central banks remained in abeyance. Since the crisis, however, the pursuit of financial stability has been restored to its place as a core central-banking function. Nonetheless, important issues remain to be addressed. First, is the authorities' ability to collect the data needed to perform financial stability analysis, including the unregulated or lightly regulated parts of the financial system, an understanding of the effect of various policy measures in reducing financial system interconnectedness, and last - but by no means least - knowing where to draw the regulatory boundary. Second, there is a need for the regulatory focus to be on the complex interaction of the elements of the system as a whole and not just its individual components. Third, it is recognized that more concern must be placed on the `plumbing' of the financial system, including bringing a large portion of the over-the-counter derivatives markets into centralized clearing systems. Lastly, there has been an increased awareness of the international dimension of financial stability. The contributions in this section address these various issues.
This article examines China’s growth in home prices in order to assess whether the authorities ha... more This article examines China’s growth in home prices in order to assess whether the authorities have been able to achieve an affordable and stable housing market. It considers whether the home price declines which have occurred in some regions could trigger a financial crisis and assesses the changing real estate market, reviews policies that have been implemented, identifies potential risk factors, and considers policies based on the experiences of other countries with housing booms and busts.
Natural disasters are negative shocks that can severely disrupt the communities in which they occ... more Natural disasters are negative shocks that can severely disrupt the communities in which they occur. Disasters like hurricanes, tornados, floods, wildfires, and earthquakes, moreover, can cause severe property damage, including damages to homes, businesses, and automobiles. An important issue that arises is whether branches of banks in communities affected by natural disasters raise deposit rates to attract additional deposits in response to any deposit withdrawals and to meet any increase in loan demand for the rebuilding that takes place. Studies of the responses of banks to natural disasters increasingly find it useful to rely on a difference-in-differences (DID) identification strategy. The contribution of our paper is to examine how different choices that can be made affect the empirical results. Importantly, as our empirical results indicate, the discretion that a researcher uses in terms of the choices made at different stages do indeed produce different conclusions about the impact of natural disasters on bank deposit rates. If we do not match branches affected by natural disasters with those in adjacent communities not affected the results indicate that natural disasters have a statistically negative effect on deposit rates without matching and with a low degree of matching. However, when we use a medium or a high degree of matching there is no statistically significant effect. Moreover, when we use two different matching methods, the results differ. In the case of PSM, we find a statistically significant effect, but no effect in the case of CEM.
The recent crisis has underlined the importance of the interaction of financial innovations and t... more The recent crisis has underlined the importance of the interaction of financial innovations and the housing market. We consider five major innovations relevant to housing finance. These are (i) mortgages; (ii) specialised housing finance institutions; (iii) government interventions in housing finance in the US during the Great Depression; (iv) covered bonds; and (v) securitised mortgages. The history of these innovations and their positive and negative aspects are discussed. Future innovations to help the stability of the housing market are also suggested.
Handbook of Safeguarding Global Financial Stability, 2013
For several decades prior to the financial crisis of 2007-08, the financial stability function of... more For several decades prior to the financial crisis of 2007-08, the financial stability function of central banks remained in abeyance. Since the crisis, however, the pursuit of financial stability has been restored to its place as a core central-banking function. Nonetheless, important issues remain to be addressed. First, is the authorities' ability to collect the data needed to perform financial stability analysis, including the unregulated or lightly regulated parts of the financial system, an understanding of the effect of various policy measures in reducing financial system interconnectedness, and last - but by no means least - knowing where to draw the regulatory boundary. Second, there is a need for the regulatory focus to be on the complex interaction of the elements of the system as a whole and not just its individual components. Third, it is recognized that more concern must be placed on the `plumbing' of the financial system, including bringing a large portion of the over-the-counter derivatives markets into centralized clearing systems. Lastly, there has been an increased awareness of the international dimension of financial stability. The contributions in this section address these various issues.
This article examines China’s growth in home prices in order to assess whether the authorities ha... more This article examines China’s growth in home prices in order to assess whether the authorities have been able to achieve an affordable and stable housing market. It considers whether the home price declines which have occurred in some regions could trigger a financial crisis and assesses the changing real estate market, reviews policies that have been implemented, identifies potential risk factors, and considers policies based on the experiences of other countries with housing booms and busts.
Sweep deposits are a relatively recent and important innovation that allows investors to seamless... more Sweep deposits are a relatively recent and important innovation that allows investors to seamlessly sweep cash from brokerage firms to bank accounts and vice versa. We find that funds swept from brokerage firms to banks vary inversely with stock market performance. When the stock market declines, retail investors reduce risk and sell stocks, with the proceeds swept out of brokerage firms and into banks. The relation is asymmetric as sweep deposits do not appear to decline in response to positive movements in the stock market. Overall, sweep deposits are a primary driver backing the same asymmetric relation between domestic bank deposits and the stock market. Moreover, they are not destabilizing, but instead stabilizing for banks as households reduce risk by converting stocks to deposits during periods of high stress, helping to fund drawdowns in lines of credit by firms.
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