Found 14 article(s) for author 'David Scharfstein'

Presidential Address: Pension Policy and the Financial System

Presidential Address: Pension Policy and the Financial System. David Scharfstein, August 24, 2018, Paper, “In this paper, I examine the effect of pension policy on the structure of financial systems around the world. In particular, I explore the hypothesis that policies that promote pension savings also promote the development of capital markets. I present a model that endogenizes the extent to which savings are intermediated through banks or capital markets, and derive implications for corporate finance, household finance, banking, and the size of the financial sector. I then present a number of facts that are broadly consistent with the theory and examine a variety of alternative explanations of my findings.Link

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Social Risk, Fiscal Risk, and the Portfolio of Government Program

Social Risk, Fiscal Risk, and the Portfolio of Government Program. Samuel Hanson, David Scharfstein, Adi Sunderam, June 2018, Paper, “We develop a model of government portfolio choice in which a benevolent government chooses the scale of risky projects in the presence of market failures and tax distortions. These two frictions generate motives to manage social risk and scale risk. Social risk management makes attractive programs that ameliorate market failures in bad economic times. Fiscal risk management makes unattractive programs that entail large government outlays at times when other programs in the governments portfolio also require large outlays. We characterize the determinants of social and scale risk and argue that these two risk management motives often conflict. Using the model, we explore how the attractiveness of different financial stability programs varies with the governments scale burden and with characteristics of the economy.Link

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Pension Policy and the Financial System

Pension Policy and the Financial System. David Scharfstein, May 2018, Paper, “This paper examines the effect of pension policy on the structure of financial systems around the world. In particular, I explore the hypothesis that policies that promote pension savings also promote the development of capital markets. I present a model that endogenizes the extent to which savings are intermediated through banks or capital markets, and derive implications for corporate finance, household finance, banking, and the size of the financial sector. I then present a number of facts that are broadly consistent with the theory and examine a variety of alternative explanations of my findings.Link

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GE Capital after the Crisis

GE Capital after the Crisis. John Coates, John Dionne, David S. Scharfstein, April 2017, Case, “Keith Sherin, CEO of GE Capital, faced a decision on which hinged billions of dollars and the fate of one of America’s most storied companies. On his desk sat two secret analyses: Project Beacon, a proposal to spin off most of GE Capital to GE shareholders, and Project Hubble, a proposal to sell off GE Capital in parts. A third document sketched out the implications should GE “stay the course” on its present strategy: a continued, massive build-up of regulatory and compliance personnel to meet GE Capital’s obligations as a “SIFI”—systemically important financial institution—in the wake of the 2010 Dodd-Frank Act.Link

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Market Power in Mortgage Lending and the Transmission of Monetary Policy

Market Power in Mortgage Lending and the Transmission of Monetary Policy. David Scharfstein, Adi Sunderam, September 2014, Paper. “We present evidence that high concentration in mortgage lending reduces the sensitivity of mortgage rates and refinancing activity to mortgage-backed security (MBS) yields. We isolate the direct effect of concentration and rule out alternative explanations in two ways. First, we use a matching procedure to compare high- and low-concentration counties that are very similar on observable characteristics and find similar results. Second, we examine counties where bank mergers…Link

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Fiscal Risk and the Portfolio of Government Programs

Fiscal Risk and the Portfolio of Government Programs. Samuel G. Hanson, David S. Scharfstein, Adi Sunderam, June 2014, Paper. “This paper proposes a new approach to social cost-benefit analysis using a model in which a benevolent government chooses risky projects in the presence of market failures and tax distortions. The government internalizes market failures and therefore perceives project payoffs differently than do individual private actors. This gives it a “social risk management” motive—projects that generate social benefits are attractive, particularly if those benefits are realized in bad economic states…” Link

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An Evaluation of Money Market Fund Reform Proposals

An Evaluation of Money Market Fund Reform Proposals. Samuel G. Hanson, David S. Scharfstein, Adi Sunderam, May 2014, Paper. “U.S. money market mutual funds (MMFs) are an important source of dollar funding for global financial institutions, particularly those headquartered outside the U.S. MMFs proved to be a source of considerable instability during the financial crisis of 2007-2009, resulting in extraordinary government support to help stabilize the funding of global financial institutions. In light of the problems that emerged during the crisis, a number of MMF reforms have been proposed…” Link

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Concentration in Mortgage Lending, Refinancing Activity, and Mortgage Rates

Concentration in Mortgage Lending, Refinancing Activity, and Mortgage Rates. David S. Scharfstein, Adi Sunderam, June 2013, Paper. “We present evidence that high concentration in local mortgage lending reduces the sensitivity of mortgage rates and refinancing activity to mortgage-backed security (MBS) yields. A decrease in MBS yields is typically associated with greater refinancing activity and lower rates on new mortgages. However, this effect is dampened in counties with concentrated mortgage markets. We isolate the direct effect of mortgage market concentration and rule out alternative explanations based on borrower…” Link Verified October 12, 2014

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An Evaluation of Money Market Fund Reform Proposals

An Evaluation of Money Market Fund Reform Proposals. Samuel Hanson, David S. Scharfstein, Adi Sunderam, April 2013, Paper. “We analyze the leading reform proposals to address the structural vulnerabilities of money market mutual funds (MMFs). We assume that the main goal of MMF reform is safeguarding financial stability. In light of this goal, reforms should reduce the ex ante incentives for MMFs to take excessive risk and increase the ex post resilience of MMFs to system-wide runs. Our analysis suggests that requiring MMFs to have subordinated capital buffers could generate significant financial stability benefits. Subordinated capital provides MMFs…” Link

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Aligning Incentives at Systemically Important Financial Institutions

Aligning Incentives at Systemically Important Financial Institutions. David Scharfstein, John Campbell, March 25, 2013, Paper. “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 compensation should be structured at systemically important institutions. We also revise our proposal for contingent convertible bonds, explaining how these hybrid bonds…”  Link verified March 25, 2013

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