James A. Wilcox
J. J. and M. B. Lowrey Professor of Financial Institutions
Among the topics of my research have been credit union conversions, mutual thrift conversions, economies
of scale and costs in credit unions, bank mergers, deposit insurance reform, house prices and the housing
market, the unbanked, the banking safety net, competition in financial regulation, small business lending,
and the effects of GSEs on the economy.
A Way to Make People Buy Homes Again :[Op-Ed]. New York Times (Late Edition (east Coast)), p. A.29.
"Fluctuating Fortunes and Hawaiian House Prices," Federal Reserve Bank of San Francisco Economic Letter, December 2011.
"Credit Union Mergers: Efficiencies and Benefits," Federal Reserve Bank of San Francisco Economic Letter, September 12, 2011.
"Securitization and Small Business," Federal Reserve Bank of San Francisco Economic Letter, July 18, 2011.
"Underwriting, Mortgage Lending, and House Prices: 1996-2008," Business Economics, October 2009, pp. 189-200. Winner of the National Association for Business Economics' 2009 Edmund A. Mennis Contributed Paper Award.
"Why the U.S. Won't Have a 'Lost Decade'," Working Paper, Spring 2008.
The odds are extremely low that the U.S. will suffer a “lost decade” of low growth, high unemployment, banking and business weakness, and ineffective public policies like Japan did in the 1990s. Real estate constituted a smaller share of total assets in the U.S. than in Japan. The bubble in U.S. house prices was smaller than Japan’s. Commercial real estate prices also rose less in the U.S. than in Japan. Several large U.S. banks have already attracted additional capital. U.S. corporations now generally have considerable liquidity. The Federal Reserve has been aggressive in its monetary policy easings and supportive in its financial policy innovations. A tax rebate has already been enacted and will boost GDP growth in 2009 and 2010. Further Fed innovations are likely if conditions warrant them. Further fiscal and financial regulatory policy changes are also likely if conditions warrant them."Consumer Sentiment and Consumer Spending," FRBSF Economic Letter, Number 2008-19, June 27, 2008, pp. 1-4.
Sometimes more than others, consumer attitudes seem to help economists forecast households’ spending. This Letter explains why consumer sentiment might improve forecasts. Recent research noted here suggests that consumer sentiment helps forecast virtually every category of consumer spending, but that different aspects of consumer sentiment affect different categories of consumer spending quite differently."Forecasting Components of Consumption With Components of Consumer Sentiment," Working Paper, September 11, 2007.
We present new evidence that long-available, but long-ignored, measures of consumer sentiment can reduce errors in forecasting total consumption and its components. The component questions of the aggregate Index of Consumer Sentiment improve forecasts, not only of expenditures on durables but also of nondurables and services."Policies and Prescriptions for Safe and Sound Banking: Shocks, Lessons and Prospects," Economic Review, First and Second Quarters 2007.
The author illustrates the extent to which ensuing regulatory changes conform to the prescriptions of Perspectives on Safe and Sound Banking. He probes whether relatively untested regulatory strictures, such as prompt corrective action, will prevail when banking is heavily stressed. He then discusses how "home-run regulation" extends the reach of individual states' bank charters nationwide and whether the Fed will eventually regulate financial institutions marketwide."Credit Union Conversions to Banks: Facts, Incentives, Issues and Reforms," Filene Research Institute, May 2006.
We survey the historical, legal, and regulatory status of bank and credit union charters, followed by discussion of the incentives and constraints associated with stock and with mutual institutions. Following a critique of current conversion practices, we offer a comprehensive and concrete reform plan to improve the fairness and eficiency of credit union conversions."Housing, Credit Constraints, and Macro Stability: The Secondary Mortgage Market and Reduced Cyclicality of Residential Investment" (with Joe Peek), American Economic Review Papers and Proceedings, May 2006, forthcoming.
As Freddie Mac and Fannie Mae grew, GSEs stabilized mortgage and housing markets and contributed to the "Great Moderation" of the macroeconomy."Economies of Scale and Continuing Consolidation of Credit Unions," FRBSF Economic Letter, Number 2005-29, November 4, 2005, pp. 1-4.
Unlike banks, credit unions show large economies of scale, which increasingly pressure the credit union industry to consolidate into fewer, larger credit unions, either via mergers, acquisitions, conversions, or failures."The Increasing Integration and Competition of Financial Institutions and of Financial Regulation," Research in Finance, v. 22, 2005, pp. 215-238.
As financial institutions have increasingly integrated and competed with each other, so have financial regulation and bank regulators."Pro-cyclicality, Banks' Reporting Discretion, and 'Safety in Similarity'" (with Pipat Luengnaruemitchai), Chapter 9 in The New Basel Accord, edited by Benton E. Gup, South-Western Publishing, 2004, pp. 151-175.
Regulators allow banks to report fewer problem loans when other banks are troubled. This regulatory laxity encourages banks to run for the safety of the herd when dangers lurk."Secondary Mortgage Markets, GSEs, and the Changing Cyclicality of Mortgage Flows" (with Joe Peek), in Research in Finance, v. 20, edited by Andrew H. Chen, Elsevier Press, 2003.
Increasingly during recessions, GSEs countercyclically supply mortgage funds when banks and other lenders retrench."The Fall and Rise of Banking Safety Net Subsidies" (with Joe Peek), in Too-Big-to-Fail: Policies and Practices in Government Bailouts, edited by Benton E. Gup, Praeger Books, 2003.
Reforms of financial regulations, such as FIRREA and FDICIA, reduced banking safety net subsidies before 2000, but subsidies likely rose after that." Who is Unbanked, and Why: Results from a Large, New Survey of Low- and Moderate-Income Individuals" (with Todd Vermilyea), Proceedings of the 38th Annual Bank Structure Conference, Federal Reserve Bank of Chicago, May 2002.
Households are unbanked, not only because of their own socioeconomic characteristics, but also because of the characteristics of their neighborhoods."MIMIC: A Proposal for Deposit Insurance Reform," Journal of Financial Regulation and Compliance, v. 9(4), November 2001, pp. 338-349.
This proposal for deposit insurance reform mimics the incentives and practices of a private-sector, mutual, insurance organization. It calls for the FDIC to explicitly pay the Treasury for its line of credit and "catastrophe insurance.""The Baby Boom, 'Pent-Up' Demand, and Future House Prices" (with Joe Peek), Journal of Housing Economics, v. 1, 1991, pp. 347-367.
Contrary to Mankiw-Weil, we forecasted that aging baby boomers would push up house prices."The Measurement and Determinants of Single-Family House Prices" (with Joe Peek), AREUEA Journal, v. 19(3), 1991, pp. 353-382.
Home improvements make house prices seem to rise faster than indexes report. Interest rates, incomes, and baby boomers detectably affect inflation-adjusted, or real, house prices."Nominal Interest Rate Effects on Real Consumer Expenditure," Business Economics, October 1990, pp. 31-37.
Because lenders impose ceilings on borrowers' payment to income ratios, even when interest rates rise due to inflation adjustments, consumer spending declines.