The Real Effects of Liquidity During the Financial Crisis: Evidence from Automobiles

Benmelech, Efraim; Meisenzahl, Ralf R.; Ramcharan, Rodney

doi:10.2139/ssrn.2511181

Cited by 49 publications

(68 citation statements)

References 36 publications

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“…Finally, and most importantly, we limit the analysis to bank‐financed transactions. While Benmelech, Meisenzahl, and Ramcharan () suggest an important role for captives in providing credit directly, we are interested in the indirect effects of captive financing through machine collateral requirements. To isolate these effects, it may be important to set aside transactions for which captives had a direct role and instead assess how captive lending interacts with noncaptive lenders' assessment of collateral.…”

Section: Resultsmentioning

confidence: 99%

“…For example, manufacturing firms such as Toyota, John Deere, and Caterpillar originate loan portfolios in a given year that would rank them among the top banks in terms of business and non‐credit card installment lending (as of 2012, #9, 15, and 17, respectively) . Recent work by Stroebel () and Benmelech, Meisenzahl, and Ramcharan () further demonstrates the importance of these vertically integrated lenders in the markets for new housing and cars, respectively.…”

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confidence: 99%

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Who Finances Durable Goods and Why It Matters: Captive Finance and the Coase Conjecture

Murfin

Pratt

2019

The Journal of Finance

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We propose that, by financing their own product sales through captive finance subsidiaries, durable goods manufacturers commit to higher resale values for their products in future periods. Using data on captive financing by the manufacturers of heavy equipment, we find that captive-backed models have lower price depreciation. The evidence is consistent with captive finance helping manufacturers commit to ex-post actions that support used machine prices. This, in turn, conveys higher pledgeability for captive-backed products, even for individual machines financed by banks. Although motivated as a rent-seeking device, captive financing generates positive spillovers by relaxing credit constraints.

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Section: Resultsmentioning

confidence: 99%

mentioning

confidence: 99%

Who Finances Durable Goods and Why It Matters: Captive Finance and the Coase Conjecture

Murfin

Pratt

2019

The Journal of Finance

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“…Benmelech et al (2017) find that had LOLR interventions been effective in preventing the collapse of the assetbacked commercial paper market, then the interventions might have contained the real effects of the crisis. We find that DW and switched banks maintained their loans-and-discounts portfolios, suggesting there was not as much of a contraction of lending at those banks, which can be interpreted as a success of the DW.…”

Section: Introductionmentioning

confidence: 96%

Liquidity from Two Lending Facilities

Anbil

Vossmeyer

2017

FEDS

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During financial crises, the lender of last resort (LOLR) uses lending facilities to inject critical funding into the banking sector. The facilities need to be designed in such a way that banks are not reluctant to seek assistance due to stigma and that banks with liquidity concerns are attracted rather than those prone to risk-taking and moral hazard incentives. We use an unexpected disclosure that introduced stigma at one of two similar LOLRs during the Great Depression to evaluate whether banks used LOLR assistance to improve their liquidity needs using a novel trivariate model with recursive endogeneity. We find evidence that banks that approached the facility with stigma were less liquid and reduced their position of safe assets in comparison with banks that approached the facility with no stigma. Thus, stigma forced the pool of LOLR borrowers to separate into different groups of banks that ex-post revealed their liquidity preferences. This finding sheds light on why and when banks approach their LOLR.

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“…Understanding the composition and distribution of household balance sheets-and how the two have evolved over time-is important for a host of economic policies. The allocation of assets and debts will influence household exposure to unexpected economic shocks (Mian, Rao, and Sufi 2013) and the preparedness of the current workforce for future retirement (Henriques et al 2018); portfolio composition also has implications for the transmission of monetary and fiscal policy (Mian, Rao, and Sufi 2013;Benmelech, Miesenzahl, and Ramcharan 2017;Poterba and Samwick 2003), and it can influence the future path of wealth and income inequality (Piketty 2013;Stiglitz 2012).…”

Section: Introductionmentioning

confidence: 99%

Trends in Household Portfolio Composition

Thompson¹,

Bricker²,

Moore³

2019

Federal Reserve Bank of Boston Research Department Working Papers

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We use data from the Federal Reserve Board's Survey of Consumer Finances (SCF) to explore how household asset portfolios in the United States evolved between 1989 and 2016. Throughout this period, two key assets-housing and financial market assets-drove the household balance sheet evolution; however, we find a great heterogeneity in the balance sheets that averages and aggregates conceal. We observe that ownership of assets has become more concentrated over time, and we show that nearly all of the time series variation in financial vulnerabilities in family balance sheets is due to middle-income families, who hold most of their assets in housing and are often the most highly leveraged income group in the housing market. Tracking the evolution of wealth over time among birth-year cohorts, we observe the standard life-cycle asset accumulation processes among low-, middle-, and high-income families.

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The Real Effects of Liquidity During the Financial Crisis: Evidence from Automobiles

Cited by 49 publications

References 36 publications

Who Finances Durable Goods and Why It Matters: Captive Finance and the Coase Conjecture

Who Finances Durable Goods and Why It Matters: Captive Finance and the Coase Conjecture

Liquidity from Two Lending Facilities

Trends in Household Portfolio Composition

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