Economics Commons^™

Lessons Learned: Zachary Taylor, Maryann Haggerty

Journal of Financial Crises

Zachary Taylor joined the Federal Reserve Bank of New York (FRBNY) in January 2009 to lead the team responsible for managing and unwinding the central bank’s Maiden Lane II and III portfolios, which were acquired in connection with the intervention to assist American International Group (AIG). Taylor later took over responsibility for the Maiden Lane portfolio consisting of former Bear Stearns assets as well as the unwinding of the Term Asset-Backed Securities Loan Facility (TALF), another crisis-era program. All told, those portfolios amounted to more than $140 billion in residential mortgage-backed securities (RMBS), collateralized debt obligations (CDO), credit default …

Lessons Learned: Robert Hoyt, Esq., Yasemin Esmen

Journal of Financial Crises

Robert Hoyt was General Counsel at the U.S. Department of Treasury between 2006 and 2009. He oversaw legal aspects of policies implemented to manage the crisis, including the rescues of Bear Stearns, AIG, and the U.S. Auto industry, the conservatorship of Fannie Mae and Freddie Mac, and the failure of Lehman Brothers, as well as the creation and implementation of the Troubled Asset Relief Program (TARP.) This Lessons Learned is based on a phone interview with Mr. Hoyt.

Lessons Learned: Alejandro Latorre, Maryann Haggerty

Journal of Financial Crises

At the time of the 2007-09 global financial crisis, Alejandro Latorre was an assistant vice president at the Federal Reserve Bank of New York (FRBNY). He was active in the bailout of American International Group (AIG) from its inception to the end, when AIG repaid its outstanding obligations to both the Federal Reserve and the U.S. Treasury. This Lessons Learned summary is based on a Feb. 26, 2020, interview. He emphasized that the views discussed here are his own, not the views of anyone else currently or previously within the Federal Reserve System or the views of his current employer.

Lessons Learned: Sarah Dahlgren, Alec Buchholtz, Rosalind Z. Wiggins

Journal of Financial Crises

Sarah Dahlgren was the Executive Vice President and head of the Financial Institution Supervision Group at the Federal Reserve Bank of New York (FRBNY) during the crisis and instrumental in the rescue of American International Group (AIG). This Lessons Learned summary is drawn from a March 22, 2018, interview in which she gave her take on how central bankers can prepare for future crises.

Lessons Learned: Chester B. Feldberg, Maryann Haggerty

Journal of Financial Crises

Chester B. Feldberg worked for the Federal Reserve Bank of New York (FRBNY) for 36 years in a variety of roles. In the aftermath of the Global Financial Crisis, he served as a trustee for the AIG Credit Trust Facility (2009-2011). The trust was established in early 2009 to hold the equity stock of American International Group Inc. (AIG) that the U.S. government had received as a result of the 2008 AIG bailout. The three trustees were responsible for voting the stock, ensuring satisfactory corporate governance at AIG, and eventually disposing of the stock.

When he was named as a …

Lessons Learned: Eric Dinallo, Maryann Haggerty

Journal of Financial Crises

Eric Dinallo was New York State Superintendent of Insurance from January 2007 through July 2009. In New York, as throughout the United States, insurance companies are regulated at the state level. In his position as Superintendent, Dinallo oversaw the insurance operating companies of American International Group (AIG) within New York. AIG’s holding company, however, was supervised at the federal level. Much of AIG’s problems came from its non-insurance subsidiary AIG Financial Products (AIGFP), which was a major presence in the market for credit default swaps (CDS), a type of derivative that was a factor behind the 2007-09 financial crisis. This …

The Rescue Of Fannie Mae And Freddie Mac – Module Z: Overview, Rosalind Z. Wiggins, Ben Henken, Adam Kulam, Daniel Thompson, Andrew Metrick

Journal of Financial Crises

In September 2008, as the financial crisis that had begun the previous year escalated, the US government appointed a conservator for two government-sponsored enterprises (GSEs), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), that dominated the secondary mortgage market and were among the largest participants in the global capital markets. The conservatorships were the hallmark of a multipart rescue plan intended to save the firms from insolvency and a disorderly collapse and required the combined and coordinated efforts of several government agencies and instrumentalities. Ultimately, the government invested $191.5 billion into the …

The Rescue Of Fannie Mae And Freddie Mac – Module C: Gse Credit Facility, Emily Vergara

Journal of Financial Crises

In 2007 and 2008, the collapse of the subprime mortgage market and the deterioration of the housing market more generally precipitated a crisis at the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which together held or guaranteed $5.3 trillion in mortgage assets. Over the course of two years, both entities suffered high losses and saw their liquidity positions deteriorate as the market perceived their rapid decline. On September 6, 2008, the Federal Housing Finance Agency (FHFA), pursuant to the authority of the Housing and Economic Recovery Act (HERA) of 2008, took Fannie …

The Rescue Of American International Group Module Z: Overview, Rosalind Z. Wiggins, Aidan Lawson, Steven Kelly, Lily S. Engbith, Andrew Metrick

Journal of Financial Crises

In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Governors used its emergency authority under Section 13(3) of the Federal Reserve Act to authorize the largest loan in its history, a $85 billion collateralized credit line to American International Group (AIG), a $1 trillion insurance and financial company that was experiencing severe liquidity strains. In connection with the loan, the government received an equity interest representing 79.9% of the company’s ownership. AIG continued to experience a depressed stock price, asset devaluations, and the risk of ratings downgrades leading to questions about its solvency. …

The Rescue Of American International Group Module E: Maiden Lane Iii, Lily S. Engbith, Devyn Jeffereis

Journal of Financial Crises

Starting in mid-2007, American International Group (AIG) faced increasing collateral calls from counterparties looking to protect their positions in credit default swap (CDS) contracts that AIG had written on residential and commercial collateralized debt obligations (CDOs) (US COP 2010, 28-30). Per these agreements, the AIG parent company was responsible for insuring the value of the CDOs against the risk of a negative credit event, such as default (GAO 2011, 5; US COP 2010, 29-30). AIG’s immediate need for liquidity on September 16, largely driven by a securities lending program and those collateral calls, prompted the Federal Reserve to lend the …

The Rescue Of American International Group Module D: Maiden Lane Ii, Lily S. Engbith, Devyn Jeffereis

Journal of Financial Crises

In September 2008, American International Group (AIG) faced increasing difficulty in returning cash collateral to counterparties looking to terminate, rather than roll over, their securities lending agreements, in part because the company had invested the collateral in residential mortgage-backed securities (RMBS), which were becoming illiquid. The Federal Reserve Bank of New York (FRBNY) provided liquidity to the company, including through the Securities Borrowing Facility (SBF), which allowed for the repayment of cash collateral but did not address the falling values of the RMBS. In November 2008, the Federal Reserve Board authorized the creation of Maiden Lane II (ML II), a …

The Rescue Of American International Group Module C: Aig Investment Program, Alec Buchholtz, Aidan Lawson

Journal of Financial Crises

In September 2008, the Federal Reserve Bank of New York (FRBNY) extended an $85 billion credit line to AIG to address its liquidity stresses, but AIG’s balance sheet remained under pressure. The insurance giant was projected to report large third-quarter losses and was at risk of being downgraded by major credit rating agencies. For these reasons, in early November 2008, the US Treasury invested $40 billion of Troubled Assets Relief Program (TARP) funds into AIG in exchange for 4 million shares of AIG Series D preferred stock and a warrant to purchase AIG common stock. The investment helped repay a …

Barriers To Post-Secondary Success, Douglas Swanson, Najeana Henderson, Maritza Sloan

Dissertations

This study reviews factors that prior studies have identified or failed to consider as barriers to post-secondary success. The three main areas include academic success for Latinx students after high school, organizational systems and their impact on African-American students’ postsecondary readiness, and what workers think of their high school education with regards to career preparedness.

Five factors are identified as major barriers for Latinx students to continue in a higher education system. A survey of former students from Saint Louis, Missouri, and Dallas, Texas, metroplex area identified 56 Latinx students that participated in an initial survey. This led to a …

The Case For Public Investment In Higher Pay For New York State Home Care Workers: Estimated Costs And Savings, Isaac Jabola-Carolus, Stephanie Luce, Ruth Milkman

Publications and Research

This report explores one potential solution to the mounting home care labor shortage in New York State: substantially raising wages for the state's home care workers. The analysis presents detailed projections, based on the best available data, of the economic effects of such an intervention, estimating the costs and benefits that would result. We find that public funding to raise home care wages would require significant resources, but those costs would be surpassed by the resulting savings, tax revenues, and economic spillover effects. The net economic gain would total at least $3.7 billion. Lifting wages would also help fill nearly …

Labor Market Monopsony And Wage Inequality: Evidence From Online Labor Market Vacancies, Samuel I. Thorpe

Undergraduate Economic Review

This paper estimates the effects of employer labor market power on wage inequality in the United States. I find that inequality as measured by interdecile range is 23.7% higher in perfectly monopsonistic labor markets than in perfectly competitive markets, even when controlling for commuting zone and occupation fixed effects. I also decompose these results into 50/10 and 90/50 ratios, finding much larger impacts on inequality among low earners. These results suggest that monopsony power has significant and policy-relevant impacts on wage inequality, and particularly harms the lowest earning subsets of the labor force.

Child Care Costs In The Mountain West, Saha Salahi, Kristian Thymianos, William E. Brown Jr., Caitlin J. Saladino

Economic Development & Workforce

This fact sheet examines the cost of child care using data from the Care Index, a collaboration between New America, Care.com, and other organizations. Data for the Mountain West states of Arizona, Colorado, Nevada, New Mexico, and Utah are included in this document.

Depth-Weighted Forecast Combination: Application To Covid-19 Cases, Yoonseok Lee, Donggyu Sul

Center for Policy Research

We develop a novel forecast combination based on the order statistics of individual predictability when many forecasts are available. To this end, we define the notion of forecast depth, which measures the size of forecast errors during the training period and provides a ranking among different forecast models. The forecast combination is in the form of a depth-weighted trimmed mean, where the group of models with the worst forecasting performance during the training period is dropped. We derive the limiting distribution of the depth-weighted forecast combination, based on which we can readily construct forecast confidence intervals. Using this novel forecast …

Trimmed Mean Group Estimation, Yoonseok Lee, Donggyu Sul

Center for Policy Research

This paper develops robust panel estimation in the form of trimmed mean group estimation for potentially heterogenous panel regression models. It trims outlying individuals of which the sample variances of regressors are either extremely small or large. The limiting distribution of the trimmed estimator can be obtained in a similar way to the standard mean group estimator, provided the random coefficients are conditionally homoskedastic. We consider two trimming methods. The first one is based on the order statistic of the sample variance of each regressor. The second one is based on the Mahalanobis depth of the sample variances of regressors. …

The Effect Of Industrial Robots On Workplace Safety, Ling Li, Perry Singleton

Center for Policy Research

This study measures the effect of industrial robots on workplace safety at the commuting zone level, exploiting potentially exogenous variation in robot exposure due to technological progress. Workplace safety is measured by workers involved in severe or fatal accidents inspected by the Occupational Safety and Health Administration. From 2000 to 2007, we find that one additional robot in exposure per 1,000 workers decreased the OSHA accident rate at the mean by 15.1 percent. We also find that robot exposure decreased OSHA violations and accidents more likely to be affected by robot penetration, specifically those involving machinery or electrical.

Venture Capital In Nevada, Peter Grema, Caitlin J. Saladino, William E. Brown Jr.

Economic Development & Workforce

This fact sheet provides an overview of venture capital in the State of Nevada. Venture capital is an essential part of economic diversification and business startup development. The Mountain West states of Arizona, Colorado, New Mexico, and Utah are used for comparative purposes to add context to Nevada’s venture capital ecosystem. The differing nature of venture capital funds in Northern and Southern Nevada is delineated.

Nevada's Plan For Recovery And Resilience, Sri International, Rcg Economics, Brookings Mountain West

Policy Briefs and Reports

The report that follows contains the following components:

• An economic forecast from RCG Economics on the situation expected for Nevada—GDP and employment—in the fall of 2021 (subject to all the present uncertainties faced by Nevada and the country as a whole).
• A series of immediate actions, in which GOED plays a leadership role, to shelter and prepare for recovery key components of Nevada’s economy. The particular focus is on “Main Street” and small and medium sized businesses.
• A set of visionary strategies, firmly grounded in Nevada’s underlying assets, that will accelerate the diversification of the state’s economy and the transition …

Lessons Learned: Ron Borzekowski, Mercedes Cardona, Rosalind Z. Wiggins

Journal of Financial Crises

Ron Borzekowski was a senior economist at the Federal Reserve Board when he was detailed to join the Financial Crisis Inquiry Commission (FCIC) as a senior researcher and later became deputy to research director Greg Feldberg. The 10-member bipartisan commission, charged with investigating and determining the causes of the crisis, held more than 19 hearings, and interviewed more than 700 people from September 2009 to Jan. 2011. It issued a 662-page report explaining why the crisis came about and the roles of financial institutions, government, and the public. This Lessons Learned is based on an interview with Mr.Borzekowski.

Lessons Learned: Greg Feldberg, Sandra Ward, Rosalind Z. Wiggins

Journal of Financial Crises

Greg Feldberg was a senior supervisory financial analyst at the Board of Governors of the Federal Reserve experienced in regulating large banks when he was recruited to the Financial Crisis Inquiry Commission (FCIC) where he worked from 2010-11, becoming its Director of Research. The FCIC was a bipartisan commission charged with investigating the causes of the global financial crisis of 2007-09. Feldberg shared thoughts about some of the challenges faced by the commission and why its report is important. This "Lessons Learned" is based on an interview with Mr. Feldberg.

Lessons Learned: Christopher Seefer, Mercedes Cardona

Journal of Financial Crises

Christopher Seefer was recruited to the Financial Crisis Inquiry Commission (FCIC) to serve as the commission’s director of investigations. The 10-member bipartisan commission wascharged with investigating and determining the cause of the global financial crisis of 2007-09 (GFC). The commission held over 19 hearings and interviewed more than 700 people from September 2010 to January 2011 and produced a662-page report that attempted to explain why the crisis came about and the roles of government and private enterprises in the crisis.This “Lessons Learned” is based on an interview with Mr. Seefer.

Lessons Learned: Wendy Edelberg, Sandra Ward

Journal of Financial Crises

Wendy Edelberg served initially as Director of Research at the Financial Crisis Inquiry Commission (FCIC) before eventually being named Executive Director. Established in the wake of the global financial crisis of 2007-09, the FCIC was a bipartisan panel of six Democrats and four Republicans charged with determining the causes of the worst financial crisis since the Great Depression. Edelberg built the organization from the ground up, hiring staff, instituting operating procedures, establishing guidelines, managing communications, and reporting to the commissioners. This "Lesson Learned" is based on an interview with Ms. Edelberg.

Lessons Learned: Phil Angelides, Sandra Ward

Journal of Financial Crises

Phil Angelides chaired the Financial Crisis Inquiry Commission (FCIC) established by Congress in the aftermath of the global financial crisis of 2007-09 with the purpose of understanding what precipitated the crisis so that any future crises might be averted. The 10-member bipartisan commission, known as the “Angelides Commission” after its chair, convened in September 2010. Meeting in a span of 15 months and holding 19 public hearings and interviewing more than 700 people, the commission submitted its findings in January 2011. The commission concluded that the crisis was avoidable, the “result of human actions, inactions, and misjudgments.” The report included …

Monetization Of Fiscal Deficits And Covid-19: A Primer, Aidan Lawson, Greg Feldberg

Journal of Financial Crises

Monetization—also known as “money-financed fiscal programs” or “money-printing”—occurs when a government finances itself by issuing currency or other non-interest-bearing liabilities, such as bank reserves. It poses real risks—potentially excessive inflation and encroachment on central-bank independence—and some paint it as a relic of a bygone era. The onset of the COVID-19 crisis, however, forced governments to spend heavily to combat the considerable economic and public health impacts. As government deficits climbed, monetization re-entered the conversation as a way to avoid the massive debt burdens that some nations may face. This paper describes how monetization works, provides key historical examples, and examines …

Reimagining China’S Transportation Funding Investments In Africa In The Context Of Covid-1, Clovia Hamilton, Sira Maliphol

Technology & Society Faculty Publications

Africa has not invested enough in its healthcare system, and China has been investing in and financing much of Africa’s transportation system. Many African countries’ fragile health and transportation systems have been further weakened by the COVID-19 pandemic. This literature review confirms the interdependence of the key functional areas of comprehensive development planning and the importance of building and maintaining a sound transportation infrastructure. With respect to partnerships with China, African nations need to strengthen government functional areas more comprehensively, considering all of the areas of development planning including trade as well as transportation and aid issues. It is all …

The Exploitation Or Protection Of Communities And Exploited Persons?, Spencer Boldt

Undergraduate Honors Theses

This study was intended to dissect the inner workings of the newly implemented Bill C-36 in Canada, The Protection of Communities and Exploited Peoples Act through a mixed methods approach. This was done through comparing statistical research (demographics, crime data, and overall economic state) within Regina to interviews conducted with those individually involved in prostitution and the community of the city. This study was meant to draw out the differences between what the statistics depict, a growth in the overall safety of Regina, versus the perspectives gained from multiple interviewees. With this mixed method approach I have deduced that Bill …

Is The Irish Immigration Policy Delivering The Best For Its Economy Through Its Non-Eu Dependent Immigrants. An Empirical Study, Pai M.J Arjun

Masters

The Emerald Isle is fast becoming the next big hotspot for highly skilled migrants aspiring to relocate to the last English-speaking nation within the European Union [EU]. The transition from the state of being an emigrant country to an immigrant nation poses complex opportunities for the country, its people, and the immigrants who relocate in making Ireland their home. Despite a consistent inflow of skilled immigrants migrating into the country since the last few decades, policy reforms adopted in Ireland towards dependent immigrants remain reactive, lacks the backing of studies in evaluating the utilization of available skilled dependent immigrants in …