James Barth
Auburn University, Department of Finance, Faculty Member
- James R. Barth is the Lowder Eminent Scholar in Finance at Auburn University, a Senior Fellow at the Milken Institute... moreJames 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 Wileyedit
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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... 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.
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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... 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.
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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... 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.
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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... 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.
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Research Interests: Economics, European Union, Sovereign Debt, Financial Crisis, Financial System, and 15 moreSocial Science Research Network, Credit Risk, Bank Capital, Capital, Design Methodology, Eurozone, Interdependence, European Debt Crisis, Insolvency, Fixed Assets, Sovereign Debt Crisis, Bank Risk, Capital Requirements, Sovereign Risk, and Credit Default Swap
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The belief that some banks are too big to fail became reality during the financial crisis of 2007–2009 when the biggest banks in the United States were bailed out. Since then, big banks have grown much bigger and have become increasingly... more
The belief that some banks are too big to fail became reality during the financial crisis of 2007–2009 when the biggest banks in the United States were bailed out. Since then, big banks have grown much bigger and have become increasingly complex. This development has led to far greater attention on the need to resolve the too-big-to fail-problem. This paper examines the way in which the Federal Deposit Insurance Corporation has resolved troubled banks over time and throughout the various regions of the nation. The paper also examines post-crisis regulatory reform by focusing on the new orderly liquidation authority the Dodd-Frank Act provides to the FDIC to serve as the receiver for big banks whose failure poses a significant risk to the country's financial stability. We assess whether this process will indeed eliminate the too-big-to-fail problem.
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database on the regulation Supervision of Banks and supervision of banks in around the W orld 1 07 countries should betteraround the orld ~~~~~~~~~~~inform advice about bank regulation and supervision A New Database and lower the marginal... more
database on the regulation Supervision of Banks and supervision of banks in around the W orld 1 07 countries should betteraround the orld ~~~~~~~~~~~inform advice about bank regulation and supervision A New Database and lower the marginal cost of empirical research.
After two decades of extreme turbulence in banking and financial markets around the world, it is reasonable to ask about the current status of banking regulation and supervision. Our unique starting point for answering that question comes... more
After two decades of extreme turbulence in banking and financial markets around the world, it is reasonable to ask about the current status of banking regulation and supervision. Our unique starting point for answering that question comes from the fact that we make use of the first, and therefore the oldest, detailed, multi -country database on banking regulation and supervision, developed by us twenty years ago. We compare that 1993 data for 19 developed market economies to similar data from the most recent (2011-2012) World Bank survey data on banking supervision and regulation. Key observations emerging from our inter-temporal cross-country analysis include the following: (1) the very largest banks retain the same kind of dominance in 2011 as they did twenty years ago (before the continued occurrence of ever-more serious financial crises); (2) in the case of some basic banking activities, including in particular funding practices, the nature of systemic risks seems to have remain...
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This chapter relies on a factor-based forecasting model for net charge-off rates of banks in a data-rich environment. More specifically, we employ a partial least squares (PLS) method to extract target-specific factors and find that it... more
This chapter relies on a factor-based forecasting model for net charge-off rates of banks in a data-rich environment. More specifically, we employ a partial least squares (PLS) method to extract target-specific factors and find that it outperforms the principal component approach in-sample by construction. Further, we apply PLS to out-of-sample forecasting exercises for aggregate bank net charge-off rates on various loans as well as for similar individual bank rates using over 250 quarterly macroeconomic data from 1987Q1 to 2016Q4. Our empirical results demonstrate superior performance of PLS over benchmark models, including both a stationary autoregressive type model and a nonstationary random walk model. Our approach can help banks identify important variables that contribute to bank losses so that they are better able to contain losses to manageable levels.
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It is well known that banks in countries around the world play a key role in allocating resources that are essential to economic growth and development. It is also well known that banks do not always allocate resources to the most... more
It is well known that banks in countries around the world play a key role in allocating resources that are essential to economic growth and development. It is also well known that banks do not always allocate resources to the most productive projects based on both risk and return considerations. This was the case during the recent global financial crisis when some banks engaged in such excessively risky and less productive activities that they either failed or were bailed out. The severity of the crisis underscores the need for governments to put in place bank regulatory regimes that prevent such deplorable episodes.
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“Too big to fail” traditionally refers to a bank that is perceived to generate unacceptable risk to the banking system and indirectly to the economy as a whole if it were to default and unable to fulfill its obligations. Such a bank... more
“Too big to fail” traditionally refers to a bank that is perceived to generate unacceptable risk to the banking system and indirectly to the economy as a whole if it were to default and unable to fulfill its obligations. Such a bank generally has substantial liabilities to other banks through the payment system and other financial links, which can be sources of contagion if a bank fails. The main objectives in this paper are to identify the different dimensions of “too big to fail” and evaluate various proposed reforms for dealing with this problem. In addition, we document the various dimensions of size and complexity, which may contribute to or reduce a bank’s systemic risk. Furthermore, we provide an assessment of economic and political factors shaping the future of “too big to fail.”
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Research Interests: Business, Civil Law, Accounting, Economic Growth, Financial Systems, and 15 moreAuditing, Developing Countries, Emerging Markets, Banking Regulation, Corruption, Dummy Variables, Inequality, Financial Services, Insurance, Government Policy, Auditor, Currency, Financial intermediation, Balance Sheet, and Capital Requirements
ACKNOWLEDGMENTS The authors benefited from the comments of Joseph Stiglitz, Mark Gertler, Frederic Mishkin, and seminar participants at the NBER Conference on Prudential Supervision: What Works and What Doesn’t, January 13-15, 2000,... more
ACKNOWLEDGMENTS The authors benefited from the comments of Joseph Stiglitz, Mark Gertler, Frederic Mishkin, and seminar participants at the NBER Conference on Prudential Supervision: What Works and What Doesn’t, January 13-15, 2000, Islamorada, Florida. This paper will be published as a chapter in the forthcoming book, Prudential Supervision: What Works and What Doesn’t, Frederic S. Mishkin, Ed. We gratefully acknowledge the excellent research assistance provided by Teju Herath, Cindy Lee and Iffath Sharif. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors,and do not necessarily represent,the views of the World Bank, its Executive Directors or the countries they represent. Milken Institute 1250 Fourth Street Santa Monica, California 90401-1353
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Research Interests: China and Public sector
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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... 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.