A review of the 2007-2008 financial crisis is conducted. We synthesize the insights provided by literature on the impact of this crisis on the United States and other countries. The extant literature on the policies undertaken by policymakers in United States and Europe and their global impact...

In the thirteen years since the onset of 2007-2008 financial crisis, economists and researchers have thoroughly investigated the financial crisis. We conduct a selective review of the extant literature on the financial crisis, with special emphasis on the US mortgage markets, as they were the...

Since the conference version of this report in February 2011, bank stress tests have been almost continuously in the news. In the United States, the Dodd-Frank Act mandates annual stress tests for key institutions. In early 2011, the Federal Reserve conducted the first test under the Act on...

The current financial crisis has highlighted the growing importance of the “shadow banking system,” which grew out of the securitization of assets and the integration of banking with capital market developments. This trend has been most pronounced in the United States, but it has had a...

U.S. House of Representatives Financial Services Committee considered many important banking reforms in 2009-2010 including the Dodd-Frank Act. We show that during this period, the foreclosure starts on delinquent mortgages were delayed in the districts of committee members even though there was...

This paper shows, for the first time, how liquidity infusions from government bailouts affect loan modification in the mortgage market. The design of the Pooling and Service Agreement leads mortgage servicers to prefer foreclosure to modification when the servicers are liquidity constrained....

Dividend payouts affect the relative value of claims within a firm. When firms have contingent claims on each other, as in the banking sector, dividend payouts can shift the relative value of stakeholders' claims across firms. Through this channel, one bank's capital policy affects the equity...

How does a bank react when a substantial share of its borrowers suffer a large negative shock? To answer this question we exploit the 2014 collapse of energy prices using the universe of Mexican commercial bank loans. We show that, after the drop in energy prices, banks exposed to the energy...

UBS recently announced it would pay part of the bonuses of 6,500 highly compensated employees with bonds that would be forfeited if the bank does not meet its capital requirements. This memo underscores the benefits of contingent deferred compensation and makes recommendations for how such...

We document that increasing penalties for default reduces strategic default in financial crises by exploiting the 2009 changes to Canadian consumer insolvency regulations. Our novelty is that the incentives from increasing penalties for default operate in the opposite direction from incentives...