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Of Last Resort: Evaluating the Treasury-Equity Model of Federal Reserve Emergency Lending
Full text linkMemory, Music, Manuscripts: The Ritual Dynamics of Kōshiki in Japanese Sōtō Zen
Full text linkA book review is presented for Memory, Music, Manuscripts: The Ritual Dynamics of Kōshiki in Japanese Sōtō Zen, authored by Michaela Mross, by Junko Oba
Fighting Fear Itself : The Bank Holiday of March 1933
Full text linkIn the month preceding Franklin Roosevelt’s inauguration, a panic overwhelmed the U.S. banking system. Immediately after assuming office, Roosevelt declared a nationwide bank holiday and vowed to reopen only sound banks. Five days after the holiday ended, nearly 11,000 of the nation\u27s more than 18,000 commercial banks had reopened. Nearly 4,000 never reopened or had to be reorganized. The holiday is often credited with helping reestablish financial stability, but little is known about the mechanisms underlying the reopening process and the way in which payment systems were restored. We detail the process of reopening the banking system using narrative records provided by contemporary policymakers. Further, with new data on the date and type of reopenings, we provide descriptive statistics showing spatial and serial relationships of bank operations. Lastly, we discuss the rehabilitation programs that followed after the Holiday
United Kingdom: Northern Rock Emergency Liquidity Program, 2007
Full text linkNorthern Rock plc was a bank in the United Kingdom (UK) that experienced rapid growth from 1998 to 2007. The bank was a large issuer of UK residential mortgage-backed securities. Its funding was primarily wholesale as its retail deposit growth had not kept up with its asset growth. By August 2007, Northern Rock’s credit default swap spreads were widening and its share price falling as conditions deteriorated in the markets on which it relied for short-term funding. To meet the bank’s substantial liquidity needs, the Bank of England (BoE) announced on September 14, 2007, that it would extend an emergency liquidity facility to Northern Rock “against appropriate collateral and at an interest rate premium,” without providing further details. The announcement of the facility and the rumors in the days before led to a deposit run and prompted Her Majesty’s Treasury (HM Treasury) to extend various guarantees to Northern Rock. Northern Rock drew on the BoE’s liquidity facilities almost immediately as depositors withdrew 4.6 billion pounds sterling (GBP) within days. Northern Rock reported outstanding emergency lending of GBP 28.5 billion at the end of December 2007. In February 2008, HM Treasury took over Northern Rock. In August 2008, HM Treasury assumed from the BoE the remaining emergency loan to Northern Rock, which had fallen to GBP 14.5 billion. In 2010, the government split Northern Rock into good and bad banks, Northern Rock plc and Northern Rock Asset Management plc, respectively. The government sold the good bank to Virgin Money in January 2012 for GBP 747 million. In 2016, the National Audit Office estimated a net gain of GBP 5 billion to the government after the intervention in Northern Rock, although not on a net present value basis
United States: Bank of America Emergency Liquidity Program, 2009
Full text linkOn December 31, 2008, Bank of America (BofA) finalized its acquisition of Merrill Lynch, absorbing losses of 118 billion pool of assets. Under the ring-fencing arrangement, known as the Asset Guarantee Program (AGP), BofA would absorb the first 10 billion in loss protection after that, with BofA absorbing a further 21.1 billion, the Fed agreed to provide a loan to BofA for 90% of the amount of those losses. The Fed considered the facility an emergency loan and would charge a penalty rate. The Fed’s participation was essential to the AGP because it was the only agency that could provide a nonrecourse loan large enough to cover the entire asset pool. This message mattered to the market at the time—it signaled that the government wasn’t going to allow the systemic bank to fail. However, based on a stress test analysis of the portfolio by a third-party vendor, the Fed didn’t expect it would ever have to extend credit under the facility. BofA and the authorities never signed definitive documentation for the arrangement, and BofA never availed itself of the Fed’s loan facility or any other component of the AGP. Throughout numerous negotiations, the parties eventually reduced the size of the covered asset pool to 425 million to the Treasury, Fed, and FDIC, of which the Fed received $57 million for its lending commitment and operational costs
Value Creation and Value Capture in Indian Garment Sector Bargaining
Full text linkThis paper examines creation and distribution of surplus from global value chains (GVCs) in low- and middle-income country (LMIC) domestic supply chains. While GVC participation can enhance growth and productivity, low prices paid to small input suppliers raise concerns that gains from GVC participation accrue to the large exporters (the buyers). Supply-chain transactions often occur in bargained agreements with non-price terms that increase small supplier surplus, such as quantity stability and other insurance-like terms. Therefore, low input prices reflect both buyers’ share of surplus generated by non-price terms and buyer capture. I enrich a Nash bargaining model to study how both i) value creation through insurance-like agreement terms that mitigate spot market frictions and ii) value capture from buyers threatening to replace external suppliers with in-house production affect prices paid to small, risk-averse suppliers. Using novel transaction data from an Indian garment manufacturer and its nearly 500 fabric suppliers, I estimate a structural model to decompose dis-counts into value creation and capture. Results illustrate that discounts reflect value creation rather than buyer capture; difference-in-differences estimates yield consistent findings. Counterfactual analyses highlight that increasing buyer competition has limited effects on prices paid to small risk-averse suppliers, whereas introducing profit insurance substantially increases prices they receive
The Economics of Large Language Models: Token Allocation, Fine-Tuning, and Optimal Pricing
Full text linkWe develop an economic framework to analyze the optimal pricing and product design of Large Language Models (LLM). Our framework captures several key features of LLMs: variable operational costs of processing input and output tokens; the ability to customize models through fine-tuning; and high-dimensional user heterogeneity in terms of task requirements and error sensitivity. In our model, a monopolistic seller offers multiple versions of LLMs through a menu of products. The optimal pricing structure depends on whether token allocation across tasks is contractible and whether users face scale constraints. Users with similar aggregate value-scale characteristics choose similar levels of fine-tuning and token consumption. The optimal mechanism can be implemented through menus of two-part tariffs, with higher markups for more intensive users. Our results rationalize observed industry practices such as tiered pricing based on model customization and usage levels
The Effect of Education Policy on Crime: An Intergenerational Perspective
Full text linkWe study the intergenerational effect of education policy on crime. We use Swedish administrative data that links outcomes across generations with crime records, and we show that the comprehensive school reform, gradually implemented between 1949 and 1962, reduced conviction rates both for the generation directly affected by the reform and for their sons. The reduction in conviction rates occurred in many types of crime. The key mediators of this reduction in child generation are an increase in education and household income and a decrease in crime among their fathers
Bubble Mitigation Policies: Counterfactual Analysis and Treatment Effect Inference
Full text linkTo safeguard economic and financial stability policymakers regularly take actions designed to increase resilience to systemic risks and curb speculative market behavior. To assess the effectiveness of such mitigation policies, we introduce a counterfactual approach tailored to accommodate the mildly explosive dynamics that occur during speculative bubbles. We derive asymptotics of the estimated treatment effect under a common factor structure that allows for explosive, I(1), and stationary factors, thereby having applicability to a wide range of prevailing economic conditions. An inferential procedure is proposed for the policy treatment effect that has asymptotic validity and demonstrates satisfactory finite sample performance. An empirical analysis examines the monetary policy of interest rate hikes implemented by the Reserve Bank of New Zealand, beginning in October 2021.This policy exerted a statistically significant cooling effect on all regional housing markets in New Zealand. Our findings show that this policy led to 20%-33% reductions in house prices in five out of six regions seven months after the enactment of the interest rate hike
Litigating Landlessness: The U.S. Department of the Interior and First Circuit Court’s Appropriations of Self-governance and Socialism in Puerto Rico, 1934-52
Full text linkIn 1946, three Boston judges decided that the Puerto Rican legislature could redistribute American-owned sugar plantations to workers. Though deemed legal, the redistribution never happened. The unreported 1946 land rights case, People of Puerto Rico v. Eastern Sugar Associates, entangles how self-proclaimed socialist and anti-colonialist officials at the Department of the Interior administered a New Deal empire across Indigenous and island territories. In conjunction with the Department of the Interior’s published reports and Felix S. Cohen’s Papers at the Yale Beinecke Rare Book and Manuscript Library, case files from the Boston First Circuit Library reveal engagement between federal and military functionaries, American sugar companies, Puerto Rican political elites, and localized experiments in agrarian sovereignty to characterize the postwar United States empire in the transition from the New Deal to the Cold War.
This combination of archival and oral research connects fractured histories of American colonialism and imperialism in Latin American and Indigenous nations through a study of land use and litigation in Puerto Rico between 1941 and 1947. This paper begins to explain the tenuous legal and political relationships which have systematically deconstructed agriculture on the island. The project suggests that historical attempts at food sovereignty failed when they framed their claims in dominant terms and through colonial structures. Still, they created legal precedent and necessitated strategic shifts which make land reclamation and autonomous food production possible. Entwining these unreported facts with interdisciplinary literatures might affect how well-intentioned Americans can interact with the nation’s colonies and how colonial subjects in Puerto Rico, Latin American and Indigenous nations might strategically entangle and reject some United States institutions in pursuit of localized land and food sovereignty. This paper explores how farmers and government officials could exercise their principled intentions within an arbitrary colonial regime, it contextualizes an ongoing economic order and variegated land occupations in Puerto Rico, and proposes strategies for ongoing land use negotiations