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Fed Banking Research

Friday, October 1, 2010

Jump in Consumer Loans Due to New Accounting Standards

At first glance, the upward spike in consumer loans during March and April 2010 seems to suggest a dramatic expansion in credit. The spike itself could be seen as a strong signal that banks have loosened credit standards or originated more consumer loans in the wake of an improving economy.

While there have been improvements in consumer loans recently, the dramatic increases over the past few months have been caused by a new reporting requirement issued by the Financial Accounting Standards Board. Financial Accounting Statements 166 and 167 have implications for how banks treat off-balance-sheet special purpose vehicles. Moreover, these statements have more impact in certain loan categories and on certain bank types in particular. Read the whole article.

The Alt-A: The Forgotten Segment of the Mortgage Market

This St. Louis Fed study presents a brief overview of the Alt-A mortgage market with the goal of outlining broad trends in the different borrower and mortgage characteristics of Alt-A market originations between 2000 and 2006. The paper also documents the default patterns of Alt-A mortgages in terms of the various borrower and mortgage characteristics over this period.

Data from 2007-2010 Reveal Characteristics of Bank Failures

Economists investigate the characteristics of banks that failed and regional patterns in bank failure rates during 2007-2010 in the September/October 2010 Review, the St. Louis Fed’s economic research publication.

The article compares the recent experience with that of 1987-1992, when the U.S. last experienced a high number of bank failures. As during 1987-1992 and prior episodes, bank failures during 2007-2010 were concentrated in regions of the country that experienced the most serious distress in real estate markets and the largest declines in economic activity. The authors found that although most legal restrictions ion branch banking were eliminated in the 1990s, many banks continue to operate in a small number of markets and are vulnerable to localized economic shocks.